For residential landlords, security deposits might not be worth the hassle.
It may sound like backwards logic, but a landlord who takes the seemingly prudent step of holding a security deposit from their residential tenant may ultimately regret their decision. While holding a security deposit can protect a landlord from damages and spare the hassle of chasing a tenant for damages after a lease has ended, the risk of mishandling a security deposit is significant. There are many different ways to violate the laws in Massachusetts that protect residential tenants and punish landlords for mishandling a security deposit in their possession.
Security Deposit Statutes
To better understand the risks of holding the security deposit, here are just a few of the basic principles set forth in the Massachusetts security deposit statute (G.L. c.186, §15B) that landlords must be aware of:
- Although a tenant may hand over a security deposit at the inception of a lease, that money remains the tenant’s. It must be held in a bank within the Commonwealth of Massachusetts, and separate from the landlord’s personal funds.
- A residential landlord cannot demand or accept a security deposit that is greater than the amount of one month’s rent.
- Security deposits can only be applied for damage to the apartment caused by the tenant or unpaid rent. A security deposit cannot be used for any other reason. So, if you the landlord let your tenant use your car and he/she breaks a side mirror, you can’t use funds from the security deposit to repair the car.
- A landlord must be detailed and meticulous when applying a security deposit to repair damaged property. First, a landlord should have provided his/her tenant with a statement of damages when the lease began. This ensures that the damages being repaired were not already existing prior to the tenant’s moving in. Additionally, the landlord must provide a written itemized breakdown of the repair costs to the tenant.
- The penalties for violating the Massachusetts security deposit statute are harsh. The slightest missteps can lead to treble damages, costs and attorney’s fees being awarded to the tenant. For example, a tenant who wrongfully retains a $1000 security deposit can ultimately find themselves on the wrong end of a judgment for much more. With multiple damages, interest, costs, and attorney’s fees, a landlord can ultimately owe well over 5 times the amount of the security deposit that was withheld. This does not even take into account the landlord’s own legal fees.
- Good faith or mistakes are not usually viable defenses for landlords who violate the security deposit laws. This means that a landlord who makes an honest mistake can still find themselves facing steep penalties.
- A security deposit violation can be a defense to eviction. Evicting a residential tenant can be a difficult and lengthy process. Adding security deposit issues only complicates matters further. In 2016, the Massachusetts Supreme Judicial Court held that a landlord’s violation of G.L. c.186, §15B provided his tenant with a viable defense to the landlord’s claim for possession of the premises.
Is It Worth Holding A Security Deposit?
With these in mind, is it really worth it for a landlord to hold a security deposit that cannot even exceed the amount of one month’s rent? Like many legal issues it depends on the circumstances. Consider the following scenarios: (1) A landlord holding a $3000 security deposit just found out that their tenant has destroyed the brand new refrigerator. The costs to repair the damage exceed $3000; and (2) A landlord wishes to deduct $600 from an $1800 security deposit to repair stains to the carpet and clean the oven. Although they would still need to be diligent in providing evidence of the damage and repairs, a landlord in scenario 1 would be fortunate to have held a security deposit to cover such significant damage. The benefit of a security deposit is less apparent in scenario 2. While it may be nice to cover the $600 in repairs, it is a relatively small amount and likely not worth the risk of litigating over.
It is important to remember that a security deposit is not the only remedy available to a landlord. A landlord damaged by the actions of a tenant can always bring an action in small claims or district court to recover for damages incurred. While this remedy involves a bit more effort on the landlord’s part, the risk of exposure is far less.
The Murphy Law Group has experience representing residential and commercial landlords and tenants in Massachusetts Housing Court, District Court and Superior Court. Contact our North Andover office today at (978) 686-3200.
August and September are busy months for residential leases, particularly in college towns. Massachusetts General Laws chapter 186, §15B provides specific and detailed guidelines with respect to security deposits for landlords and tenants. It is important for both landlords and tenants to familiarize themselves with some of the basic procedures that are in place regarding security deposits. For landlords, even the slightest mishandling of a tenant’s security deposit can lead to severely punitive consequences. As a tenant, it is important to understand your rights and how your deposit is being handled. Below is a summary of some of the most important issues that are covered under the Massachusetts Security Deposit Statute:
Summary of the Massachusetts Security Deposit Rules
- Although a tenant may hand over a security deposit at the start of the lease, that deposit remains the property of the tenant during the lease. In order to protect the deposit, the landlord must place the security deposit in a separate, interest bearing bank account in Massachusetts that cannot be comingled with the landlord’s other assets.
- Within thirty days after receiving the security deposit, a landlord is required to provide a tenant with a receipt indicating the name and location of the bank in which the deposit has been deposited, as well as the amount and account number of the deposit.
- A landlord that accepts a security deposit must provide its tenant with a written statement of condition for the premises. The statement of condition should list all damage to the property that existed prior to the lease. If the tenant agrees with the statement, they should sign and return the statement to the landlord. If the tenant disagrees with anything in the statement of condition they must also make a separate written list of damages and provide it to their landlord. Failing to note previously existing damages in a statement of condition can lead to a dispute over the security deposit at the end of the lease.
- A security deposit can only be applied to three things: unpaid rent, unpaid real estate taxes, or damages to the dwelling caused by the tenant or a person under the tenant’s control.
- If a landlord deducts from a security deposit due to damage, the landlord must provide the tenant with an itemized list of damages that describes in detail the damages and the repairs that were made to such damages. This itemized list must be signed by the landlord or his/her agent and sworn under the pains and penalties of perjury.
- If a landlord fails to comply with the strict provisions of the Security Deposit Statute, they forfeit their rights to the security deposit. Moreover, a landlord could be liable for damages in excess of the amount of the security deposit. Pursuant to the statute, certain violations provide for damages in an amount equal to three times the amount of the security deposit, plus interest, court costs and reasonable attorney’s fees.
What To Do If You Have a Security Deposit Dispute
These are only a few highlights of the complicated Massachusetts Security Deposit Statute. If you are a landlord, you should speak with an attorney before potentially mishandling your tenant’s security deposit. If you are a tenant, you may want to contact a real estate attorney to find out whether your security deposit is being handled properly. The Murphy Law Group has successfully represented tenants and landlords in security deposit disputes. If you would like to discuss this matter with a real estate lawyer at our North Andover office, give us a call at (978) 686-3200 or (617) 350-7700.