Essentials of Security Deposits
Security deposits are held by landlords to protect them from unpredictable tenants. They are designed to protect landlords from damage to their property. While the landlord holds the deposit, it belongs to the tenant.
Massachusetts law dictates that a landlord may charge up to, but no more than, one month's rent for a security deposit. Upon receiving a security deposit the landlord must immediately provide the tenant with a receipt which includes the amount, date the deposit is received, who receives the deposit, and the name of the landlord.
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Within 10 days the landlord must provide the tenant with a Statement of Condition. This is a signed detailed report of the rental unit's condition. It will be used in case of conflict later. The tenant must sign and return the report within 15 days of receipt with any additional notes needed.
The landlord is required to deposit the security deposit, within 30 days of receiving it, into a separate interest-bearing account in a Massachusetts bank. The deposit must be in the tenant's name and shielded from creditors. The tenant needs to receive a receipt with the location of the security deposit and the account number. Additionally, the tenant needs to annually receive a receipt indicating the interest earned on the deposit. The interest can be paid directly by the landlord to the tenant or it can be deducted from the rent.
Massachusetts requires that the security deposit, with any interest due, be returned to the tenant within 30 days after the last day of the lease. If any money is withheld, the tenant must be provided with an itemized list of repairs and the estimates and receipts for each. The landlord must "swear under penalties of perjury" that this list is accurate.
The security deposit may only be used for repairs not mentioned in the required Statement of Condition. Anything that has deteriorated from normal wear and tear is not eligible. The security deposit may also be used for unpaid rent and real estate tax increases if agreed to in the lease.
Detailed repair records have to be retained for 2 years. The records should have a full description of the damages, the date of the repairs, receipts, and an itemized list of all costs.
Not all landlords take security deposits. Yes, they are designed to protect the landlord's property while a tenant occupies it. If the law on security deposits isn't carefully followed, they can cost the landlord. Landlords must weigh the protection security deposits give them against the liability they can create.