Becoming a Successful Landlord: The Security Deposit
September 1st came and went and if you’re a resident of the Boston area you certainly couldn’t have missed it. Tenants were moving in and out of their apartments all day in a chaotic event that may be unlike any other in the country. For tenants, the worst of it is over as they get settled into their new homes, but for the landlords the challenge has just begun. Whether you’re a landlord in the Boston area or Western Mass, you must know your rights and responsibilities in order to be successful. In September we will be running a series of posts all about what it means to be a successful landlord. In this post we will discuss the point of greatest contention between landlords and tenants: The Security Deposit.
In Massachusetts there are several rules the landlord must follow in order to collect and hold a security deposit legally. NOLO Law for All gets us started with some of the basics:
“Security deposits are among the biggest sources of dispute between landlords and tenants. To avoid problems, be sure you know state law limits on how much deposit you can charge (one month’s rent in Massachusetts), when the deposit must be returned (30 days after the tenant has moved out and returned the keys), and other restrictions on deposits. Using some sort of landlord-tenant checklist when a tenant moves in a rental (required if the landlord collects a security deposit in Massachusetts) and again at move out, and sending a written security deposit itemization when the tenant leaves, will go a long way in avoiding disputes.”
Furthermore, you must provide the tenants with two receipts in regards to the security deposit. According to the Good Neighbors Handbook,
Upon receiving a security deposit, a landlord must give the tenant a receipt, which must state:
1. The amount of the security deposit
2. The name of the person receiving it
3. The name of the landlord
4. The date on which it is received, and
5. A description of the premises being rented.
The landlord must place the money in a separate, interest-bearing account in a bank located in Massachusetts. Within thirty (30) days of
receiving the security deposit, a landlord must give the tenant a second receipt containing the following information:
1. The name and location of the bank where the money is being held
2. The account number, and
3. The amount of the deposit.
According to the Good Neighbors Handbook, the security deposit can only by the landlord for three things:
1. Unpaid rent
2. The repair of damages caused by the tenant (this does not include general wear and tear)
3. The payment of the tenant’s percentage of a property tax increase (provided that there was a tax escalator clause in the tenant’s lease)
Many landlords collect and hold security deposits illegally. If you do not give the proper receipts and Statement of Condition at the appropriate times, place the security deposit in an interest bearing escrow account, return the deposit to the tenant after move-out within the legal timeframe, or withhold any portion of the deposit for illegal reasons, the tenants can take you to small claims court to sue you for three times the deposit. As a landlord, if you do decide to collect a security deposit make sure you do it correctly.