Security Deposit Management

Lamacchia Property Management has the skills and knowledge to deal with all aspects of security deposit management.

Lamacchia Property Management assists landlords in navigating the complexities of Massachusetts’ security deposit regulations, as detailed in Chapter 112, Section 15B of the Massachusetts General Laws. Understanding these laws is crucial, as a minor oversight in certain areas could lead to penalties of up to three times the security deposit amount.

Many landlords struggle with managing security deposits properly, which can lead unnecessary stress and financial losses. Our team has the skills and knowledge to deal with all aspects of security deposit management. We’ll take care of collecting the deposits, keeping them according to state laws, and distributing them appropriately to both tenants and landlords when required. 

Collecting a security deposit is a standard practice in the Massachusetts. In Massachusetts, security deposits serve as a safeguard for the owner or manager against damage that may be caused by a tenant or unpaid rent.   However, there are detailed and clear rules about how a security deposit can be used, how it needs to be kept, and when it should be given back to the tenant. For landlords, it’s very important to know and follow the rules about security deposits and abide by the laws because failure to comply with regulations can lead to serious financial consequences.

Collecting a Security Deposit

Securing Deposits in Designated Bank Accounts

At Lamacchia Property Management, complying with the Massachusetts security deposit law is a priority.  Here’s how we manage this process:

When a security deposit is collected, the funds are deposited into a separate, interest-earning bank account. This ensures that the funds are not only secure but also generating interest. The law restricts the security deposit to a maximum of an amount equal to one month’s rent.

For properties under our management, it’s common practice to consolidate security deposits into a single account. However, as required, the account is designated as an account beyond the reach of  creditors.

Transparent Communication with Tenants

Upon the deposit of a security deposit into the designated account, we take the necessary steps to inform the tenant within 30 days. This communication includes a detailed receipt that outlines:

  • The name and location of the bank where the deposit is held, which must be a Massachusetts bank
  • The date the deposit was made
  • The name of the individual who facilitated the deposit
  • The account number

This process not only meets legal requirements but also establishes a foundation of trust and transparency between landlords, tenants, and us at Lamacchia Property Management. By handling security deposits with the utmost care and professionalism, we ensure that all parties are informed, compliant, and protected throughout the tenancy.

Interest Earned on Security Deposits

Ensuring Tenants Earn Interest on Deposits

From the commencement of their lease, tenants are entitled to earn interest on their security deposits. This interest rate is either 5% per annum or the actual rate earned from the bank, depending on which is lower. We take on the responsibility of calculating this interest annually, ensuring tenants receive what they are lawfully owed..

Transparent Annual Interest Payments

Each year, we facilitate the payment of the earned interest to the tenant. With each interest payment, we provide a detailed statement to the tenant that includes:

  • The name and address of the bank where the security deposit is held
  • The total amount of the deposit, so tenants are reminded of the initial sum that’s earning interest.
  • The account number
  • The exact amount of interest due to the tenant for that year, calculated based on the actual interest earned or the 5% statutory rate, whichever is lower.

This detailed statement is part of our commitment to transparency and ensures tenants are fully informed about their security deposit and the interest it accrues.

Statement of Condition

We understand the importance of documenting the condition of a property at the start of a tenancy. Here’s how we ensure this critical step is handled with care and precision:

Comprehensive Condition Statement

Upon receiving a security deposit or within 10 days after the beginning of a new tenancy, we provide the tenant with a detailed Statement of Condition. This document is a meticulous inventory of the property’s current state, noting any existing damage and potential violations of the state sanitary code. Our goal is to ensure a transparent and accurate baseline for the property’s condition, which protects both the landlord and the tenant.

The Statement of Condition must include a notice in 12-point bold type emphasizing the importance of the tenant’s review and agreement with the document’s contents, as follows:

“This is a statement of the condition of the premises you have leased or rented. You should read it carefully 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.”

Tenant Feedback and Agreement

Tenant’s are encouraged to thoroughly review the Statement of Condition and provide their feedback. If a tenant identifies discrepancies or additional damages not listed, they may  submit their own itemized list of damages. We then review this list and either agree with the tenant’s findings by signing the document or issue a clear statement of disagreement within 15 days.

This process ensures that both parties have a mutual understanding of the property’s condition at the lease’s start, setting a clear expectation and reducing potential disputes over the security deposit at the tenancy’s end.

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

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

Landlord Recordkeeping Requirements

As required in the Statute, we maintain complete records that is available to the tenant upon request.

Comprehensive Documentation

For every security deposit we manage, we maintain detailed records that encompass:

  • A thorough account of any damages caused by tenants to the property, ensuring that any changes in the property’s condition are accurately documented.
  • The occupancy dates for each tenant, providing a clear timeline of tenancy durations.
  • Detailed information on repairs undertaken during the tenancy, including the nature of the repairs, their dates, associated costs, and receipts. This ensures that all maintenance actions are transparent and verifiable.
  • A copy of the Statement of Condition for each tenancy, which serves as a baseline for assessing the property’s condition at the start and end of the lease.

Accessibility and Longevity of Records

We understand the importance of these records not just for internal management but also for the peace of mind of our tenants and landlords. Therefore, we ensure that:

  • These records are readily available for tenants to review upon request. This openness fosters trust and can swiftly resolve any disputes or misunderstandings regarding the property’s condition and the use of the security deposit.
  • All records are maintained for at least two years after the end of the tenancy. This period  ensures that we can provide historical data and support for any claims or issues that may arise post-tenancy.

What Deductions Can Be Made from a Security Deposit

 At the end of a tenancy, we careful follow the law which outlines the very specific reasons for which the landlord can keep all or part of the security deposit. Here is an outline of that process.

Returning the Security Deposit

Unless lawful deductions are made, we return the security deposit to the tenant within 30 days of  the tenant’s move-out date. This prompt action ensures compliance with state regulations and maintains a positive relationship between the tenant and landlord.

Permissible Deductions

In certain situations, deductions from the security deposit are necessary and justified. These include:

  • Unpaid rent: If a tenant leaves without fulfilling their rent obligations, the outstanding amount can be deducted from the security deposit.
  • Agreed property tax increases: Should the lease agreement stipulate, via a tax escalation clause, that the tenant is responsible for covering any increases in property taxes, such costs can be deducted.
  • Damage repair: Costs for repairing damage that go beyond normal wear and tear are deductible. It’s important to note that “normal wear and tear” refers to the expected deterioration of the property through ordinary and reasonable use.

Documentation and Communication

Before any deductions are made, we provide the tenant with a detailed list of the damages, the repair costs, and supporting documentation such as estimates, bills, or receipts. This documentation is provided under oath within 30 days of the tenancy’s end, ensuring transparency and giving the tenant a clear understanding of any charges against their deposit.

Protection of Rights

We strictly avoid actions that could forfeit the right to retain any part of the security deposit, such as failing to place the funds in a separate, designated account or not providing a detailed list of damages in a timely manner. Our practices are designed to protect both the landlord’s and tenant’s rights, ensuring a fair and lawful handling of the security deposit.

Adherence to Legal Requirements

Our management of security deposits is guided by a commitment to legal compliance and best practices. We ensure that all actions related to the security deposit, from deductions to the return process, are executed within the legal framework provided by Massachusetts law. This diligence protects landlords from potential legal issues and reinforces the trust placed in us by our clients.

By implementing a consistent policy for handling security deposits and any associated deductions, Lamacchia Property Management provides landlords with a safeguard against potential losses, while also ensuring that tenants are treated fairly and respectfully.

Our services relieve landlords of the burden of managing security deposits, among other responsibilities, ensuring compliance and safeguarding against potential legal and financial pitfalls. For further assistance or inquiries regarding Massachusetts’ security deposit law, Lamacchia Property Management is here to help.

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