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Accepting Security Deposits – Massachusetts Landlords Must Closely Follow the Law

By on January 27, 2016

At the beginning of a lease, most people pay very little attention to the tenant’s security deposit. After all, the tenant is happy to move into a new place and the landlord is happy to have a (hopefully) paying tenant in their rental unit. Like any other contractual relationship, the parties do not like to think about what may go wrong.  Rather, they simply hope the other party will remain reasonable throughout the process.  That, however, is not always the case.   

The Massachusetts Security Deposit Law, codified in G.L. c. 186, § 15B, is one of many laws the Commonwealth of Massachusetts has enacted to standardize the relationship between landlords and their tenants. This law sets forth very specific standards for how a landlord must handle security deposits. Below is a synopsis of the Massachusetts Security Deposit Law and possible implications, should a landlord fail to follow its requirements.

Amount

The Massachusetts Security Deposit Law specifically caps the amount a landlord may accept as a security deposit to one month of rent for the tenant.

Notification to Tenant

When a landlord accepts a security deposit, the landlord must provide a receipt to the tenant, which includes the following:

  • the amount of the security deposit and the purposes for which it can be used;
  • the name of the person receiving the security deposit;
  • the date upon which the security deposit was received;
  • a description of the rental unit; and
  • a signature by the owner/authorized agent.

 

Within 10 days of the tenancy beginning, or at the time security deposit funds are received, the landlord must give the tenant a “Statement of Condition,” signed by the landlord. Within 30 days of receiving the security deposit, the landlord must also provide the tenant with the account number, the name, and the address of the bank holding the funds.

Location and Interest on the Security Deposit

The security deposit must be kept in an interest-bearing account. Additionally, the landlord must give the tenant an annual statement setting forth the interest accrued in the interest-bearing account. 

Upon accepting a security deposit, the landlord must maintain a record of the security deposit, which must contain (1) a detailed description of any damage done to the rental unit for which the deposit was accepted; (2) the date on which the occupancy of the tenant charged with damage was terminated; and (3) whether repairs were performed to remedy tenant damage, the date of those repairs, and the costs (with receipts) of those repairs. 

Payment of Accrued Interest on the Security Deposit

For landlords who hold onto a security deposit for one year or longer after the beginning of the tenancy, the Massachusetts Security Deposit Law requires the landlord to make annual payments, on the anniversary of the lease, to the tenant for the accrued interest earned on the security deposit. The landlord must also pay over any accrued interest within 30 days after the tenancy ends.

Maintain Records Where the Tenant is Terminated for Damaging the Dwelling

Upon accepting a security deposit, the landlord must maintain a record of all security deposits received; a detailed description of  any damage done to the tenant’s premises, for which the landlord has brought suit for; a detailed description of any amount of the security deposit returned to the tenant; the date upon which the landlord terminated the tenancy based on the damage caused by the tenant; a description of all repairs made to the premises, including the date of repair, the cost thereof, and receipts for the work. The record must also include a copy of any receipt or statement of condition given to the tenant.

Itemized List of Damages Upon Expiration or Termination of the Tenancy

Once the tenancy ends, the landlord must, within 30 days, return the full amount of the security deposit to the tenant unless they specifically notify the tenant of the amounts they are withholding. This notice, referred to as an “itemized list of damages,” permits the landlord to only keep portions of the security deposit that cover the following:

  • unpaid rent or water charges;
  • unpaid increases in real estate taxes, if the tenant is responsible for them; and
  • the reasonable amount needed to repair any damages caused to the dwelling by the tenant.

 

The tenant must be provided with the itemized list of damages within 30 days of termination of the tenancy; it must be sworn to by the landlord under the pains and penalties of perjury; it must precisely itemize the nature of the damage and the repairs needed; and it must include written evidence, such as estimates or invoices. The landlord may not withhold funds from the security deposit for damages listed in the initial Statement of Condition. No other deductions from the security deposit may be made.

Implications of not following the Massachusetts Security Deposit Law

Failing to comply with the Massachusetts Security Deposit Law can lead to severe penalties. Should the landlord (1) fail to deposit the security deposit into an interest bearing account; (2) fail to provide an itemized list of damages within 30 days of termination; (3) attempt to obtain a waiver of any portion of G.L. c. 186, § 15B; (4) fail to transfer the security deposit to a successor in interest for the property; or (5) fail to return the security deposit, or the balance thereof, within 30 days, together with all accrued interest, the landlord forfeits his or her right to retain any portion of the security deposit and exposes him or herself to liability to the tenant. Violations of several of the requirements of the Massachusetts Security Deposit Law also expose the landlord to liability for triple damages and attorneys’ fees, should the tenant file a claim under (1), (4), (5) above.

A recent case in the Massachusetts Supreme Judicial Court, Garth Meikle vs. Patricia Nurse, deals with whether a landlord should be prohibited from evicting a tenant because the landlord violated the interest payment portion of the Massachusetts Security Deposit Law. Initially, the landlord won a judgment ordering the tenant to pay past due rent. However, the tenant appealed this decision and is now arguing that the landlord should be prohibited from evicting her because the landlord failed to pay $3.26 in accrued interest on her security deposit. The Supreme Judicial Court is considering the tenant’s argument that even the most minor violation of the law prohibits an eviction. While this case is still pending, it illustrates the important, and potentially drastic, implications of not carefully following the Massachusetts Security Deposit Law. The complicated and detailed nature of the law often leads landlords to misunderstand their duties as the owner of rented property. It is in the landlord’s best interest to educate themselves of the law’s requirements, and the consequences of a violation, before choosing to retain security deposits.

The above is simply a summary of many important provisions of the Massachusetts Security Deposit Law. Because each case presents a different set of facts, the eviction process is almost always unpredictable.  Nevertheless, if you are quick to action and follow the proper timeline, your chances of success greatly improve. The above is not legal advice and therefore if you are uncertain about anything in the eviction process, you should contact a Massachusetts attorney to ensure the timelines are met, the grounds for eviction are present and that all of your important documentation and witnesses have been prepared for court.    

By Jennifer Lynn, Esq. 

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