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Security Deposits in Massachusetts: Everything You Need to Know

security deposit in safeObtaining a security deposit is common in the Massachusetts rental and real estate industry. Sadly, property damage is an unavoidable part of life for landlords and property managers. In Massachusetts, security deposits protect the owner or manager if the tenant fails to follow the lease agreement. However, there are rules and standard procedures for what a security deposit can be used for, how it must be held, and when it must be returned to the tenant. As a landlord, it is crucial to understand and abide by the laws that apply to security deposits because failure to comply with regulations can lead to serious financial consequences.    

Security Deposit Laws in Massachusetts

Collecting a Security Deposit

Every landlord in Massachusetts should become familiar with the fine details of the security deposit statute contained in the Mass General Laws Chapter 112, Section 15B. If a landlord is not completely familiar with all the nuances of the law and willing to meticulously comply, then the landlord should opt not to require or accept a security deposit. One simple mistake can cost a landlord- sometimes up to three times the amount of the security deposit in damages.  

Separate Bank Account

Should a landlord choose to collect a security deposit, it is required by law for landlords to hold this deposit in a separate, interest-bearing Massachusetts bank account. An out-of-state bank is not permissible as the Massachusetts Court of Appeals ruled in the 2007 case, Taylor v. Burke.  This is because the security deposit belongs to the tenant and must be held in a Massachusetts account beyond the reach of the landlord’s creditors until and if the landlord is authorized to use it. The amount of a security deposits in Massachusetts is also regulated- it may not be in excess of the cost of one month’s rent. If a landlord has multiple properties and is collecting multiple security deposits, all deposits can be held in the same account, so long as the account is beyond the reach of creditors. There is no need for a separate account for each tenant/security deposit as the Mass Court of Appeals ruled in the 2002 case Neihaus v. Maxwell.  

When setting up the account, the landlord must disclose to the bank that the money is a security deposit being held on behalf of a tenant. Within 30 days of depositing the security money, the landlord must inform and provide the tenant with a receipt containing the following information:  the name of the bank, specific location of where the money is being held, the date of the deposit, the name of the person who received it, the account number, and a description of the rental unit. Failure to provide this information within 30 days could result in the tenant being entitled to immediate reimbursement of their funds.  

Interest on Security Deposits

The tenant is entitled to receive (starting on the first day of the tenancy) 5% interest on the security deposit or other such lesser amount of interest actually received from the bank.  As a landlord, you must pay your renter their interest annually. The payment must be given along with a statement providing the name and address of the bank in which the security deposit is held, the amount of the deposit, the account number, and the amount of interest payable to the tenant. For example, if you have the same renter for five years, the interest needs to be paid to the renter every year, not all together at the end of their five-year tenancy. If interest money is not received by the tenant after 30 days have passed into the following year, the tenant may subtract what they are owed from their next rent payment. 

The Statement of Condition

Upon receipt of the security deposit or within 10 days of the start of the tenancy, the landlord is required to provide the tenant with a statement of the present condition of the property. The statement must contain a comprehensive list of any damage existing in the property, including any existing violations of the state sanitary code. The statement must be signed by the landlord and contain the following notice in 12-point bold font: 

 ”This is a statement of the condition of the premises you have leased or rented. You should read it carefully in order to see if it is correct. If it is correct you must sign it. This will show that you agree that the list is correct and complete. If it is not correct, you must attach a separate signed list of any damage which you believe exists in the premises. This statement must be returned to the lessor or his agent within fifteen days after you receive this list or within fifteen days after you move in, whichever is later. If you do not return this list, within the specified time period, a court may later view your failure to return the list as your agreement that the list is complete and correct in any suit which you may bring to recover the security deposit.” 

To make sure you are using a proper form, we suggest using the Massachusetts Association of Realtors or the Greater Boston Real Estate Board’s Statement of Condition Form. Finally, the tenant may submit a rebuttal to the landlord, and itemize a separate list of damages. Within 15 days, the Landlord must either agree and sign or reply with a “clear statement of disagreement.” 

Landlord’s Recordkeeping Requirements

The landlords is next required to maintain written records for each security deposit collected which contains the following information and which shall be available to the tenant for inspection upon request: 

  • Detailed description of any damage done to the property by tenants 
  • The dates the tenant’s occupied the property 
  • Whether the landlord made any repairs, and the dates, costs, and receipts for any such repairs. 
  • Copy of the Statement of Condition 

All of these records must be kept for a minimum of 2 years from the date of the termination of the tenancy. 

What Can Be Deducted From a Security Deposit?

Within 30 days of the end of the tenancy, the security deposit must be returned to the tenant, except a landlord may deduct the following: 

  • Amounts for any unpaid rent  
  • Any unpaid increase in real estate tax (provided the tenant agreed in a lease to a tax escalation clause, and 
  • A reasonable amount necessary to repair damage  

 Although a landlord may withhold funds for damage, they cannot withhold funds to pay for what is considered “reasonable wear and tear.” In the case of actual damage, the landlord must provide the tenant within 30 days an itemized list of damages, sworn under the pains and penalties of perjury giving precise details of the nature of the damage and the needed repairs. This must be accompanied by written evidence such as estimates for repair, bills, invoices, or receipts for the actual costs. There can be no deductions made for any item of damage listed on the Statement of Condition (unless those items have been repaired before the termination of the tenancy).  

 If the cost of the damage exceeds the amount of the security deposit, the landlord may need to take legal action against the tenant if they are unwilling to pay for the cost.  

A landlord can forfeit the right to retain the security deposit

Here is another example of how strict the Massachusetts Security Deposit law can be for landlords. If the landlord does any of the following, they are no longer eligible to keep any portion of the security deposit: 

  1. Fail to deposit the funds in a separate account 
  2. Fail to give the tenant an itemized list of damages within 30 days of the termination of the tenancy  
  3. Tries to get the tenant to waive their rights under the security deposit law 
  4. Fails to timely transfer the deposit to a new owner if the property is sold 
  5. Fails to return the deposit (after lawful deductions, if any) within 30 days of the end of the tenancy 

If the landlord fails to comply with a, d, or e above the tenant would be entitled to damages in the amount of three times the amount of the security deposit, plus court costs and attorney fees.  

A landlord should also keep in mind that the requirements in the law DO NOT apply to vacation or recreational oriented rentals of one hundred days or less.   

Finally as stated earlier, a landlord must be diligent and willing to comply strictly with the requirements of the law if they choose to collect a security deposit. Once a decision is made to collect a deposit, the landlord should be sure to adopt a uniform policy to collect a deposit from all tenants.  If done correctly the deposit can provide the landlord with protections against losses for damages and unpaid rent.  

To read the full Massachusetts security deposit statute, click here. 

The security deposit can not be used to pay for normal wear and tear on a property. 

Security Deposit Management Resources

As a landlord, this can be a lot to keep up with. Security deposit management is one of the many services a good property management company can provide to save landlords some time, energy, and even money. Please let us know if you have any other questions about the Massachusetts security deposit law. Our team at Lamacchia Property Management ensures that every property we work follows these and other strict laws and regulations. Call us today for more information at 855-213-3410 or email is at info@lamacchiapm.com.