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The Do’s and Don’ts of Security Deposits and Last Months Rent : Massachusetts Landlord Training Series

This is part of our Landlord Training Series, to help with renting in Massachusetts and Evictions in Massachusetts.

Security deposits are one of the biggest reasons that Massachusetts landlords get in trouble and have issues during the eviction process. This is because the Massachusetts laws pertaining to a landlord accepting the security deposit are complex and even an innocent mistake can be extremely costly, usually to the tune of three times the value of the security deposit. We recommend that landlords do not charge a security deposit, and only collect last month’s rent. But whatever choice you make, if you could do collect a security deposit there are some practices you must follow to not break the law.

Security deposit laws in Massachusetts offer the landlord a very small amount of security, for a large amount of risk. In reality, any significant damage caused by the tenant, will not be covered by a security deposit, but if you keep any portion of a tenant security deposit, the most likely result will be a lawsuit. To make matters worse, if the judge agrees with the tenant side of the story, the landlord can be facing treble damages (triple) and also be forced to pay the tenant’s attorneys fees. It is more cost-effective and far less hassle, to protect your investment by carefully screening tenant’s and also treating your tenants well.

Mass. General Laws, ch.186, §15B,, you can only charge for the following:

  1. first month’s rent;
  2. last month’s rent, which must be no more than first month’s rent;
  3.  a security deposit that is no more than one months rent; and
  4. the cost of installation of a new key and lock, for the entrance door

Massachusetts law does not allow you to charge any other fees when the tenancy starts and you may not charge several months rent, only last month’s..

When accepting a security deposit from a tenant, you are required to:

  1. all funds must be deposited in a separate escrow account, and a financial institution located in Massachusetts, the special accounts protect the security deposit funds from possible attachment by creditors;
  2.   if the property is sold, these security deposit funds must be transferred to the new property owner;
  3.   you must then give the tenant a deposit slip demonstrating the amount of the funds, the landlord’s name, the location where the funds have been deposited, along with the name of the financial institution (bank) and the account number where the monies were deposited;
  4. You must also present the tenant with a statement of present conditions of the property being located (below you will find an example from the greater Boston real estate board form which allow you to meet this requirement, these can be purchased directly from their website);
  5. the tenant may present the landlord with a list of damages after moving into the premises, as the landlord your required to provide the tenant a copy of this list in 15 days or less, and provide the tenant, with either a signed agreement or disagreement of the list provided;
  6. you are required to pay your tenant 5% interest per year on the deposit, or the amount of interest that earned at the financial institution the funds have been deposited in; you required to keep accurate records of the security deposit and interest earned, and must provide them to the tenant upon request.

Security deposits must be returned within 30 days of the tenant vacating the premises, if they are a tenant at will, or within 30 days after the expiration of the lease. The only time you can use a security deposit for rent owed, is rent that is not legally being deducted to make repairs or withheld for some reason (in the case where the tenant fix something that was broken, which the landlord had failed to fix). the letter of the law must be followed perfectly, if you choose to use part or whole of the security deposit for damages, If not the tenant may be able to sue you for three times the damages (treble damages) and any legal fees that may have been incurred. You may be ordered to pay treble damages for simply not following the prescribed rules as to statement of damages or by keeping the funds located in a bank outside of the Commonwealth.

if you decide to collect last month’s rent from the tenant, you must follow these rules exactly:

  1. provide the tenant with a itemized receipt which clearly states:
  2.  the amount of the rent,
  3.  the address of the property;
  4.  the who the rent will be paid to,
  5.  that you must pay interest, and
  6. requesting that the tenant provide you with a forwarding address, where any interest earned may be sent,
  7. provided tenant with 5% interest yearly or explain that the interest can be deducted from next month’s rent. It is not required that you hold last month’s rent an escrow account such as the security deposit, but you are allowed to deduct for damages to the property from the last month’s rent. If the funds are in fact retained in an escrow account, the landlord must pay the tenant 5% interest yearly or the interest earned by the bank the money is kept in..

if you do not follow all of these requirements, tends allowed to sue you in court for damages, which also include the security deposit itself. In certain circumstances, violations of these requirements could end up costing the landlord up to three times (treble damages) the amount of the security deposit and interest, plus attorneys fees. Furthermore, tenants are able to bring any violations of these laws in a chapter 93A consumer protection case.

If you are in violation of any of the security deposit laws, your best avenue to avoid paying triple damages, would be to return the security deposit ASAP. This seems troubling for most landlords, especially in a situation where the tenant has actually significantly damaged the property, but the end result is always the same; you could be facing triple damages. Due to our Supreme Court ruling, you are able to avoid triple damages if you return the security deposit, when asked for, as long as the tenant still remains on the premises. You may find further information in the links to case law below.

It is important to remember that the laws pertaining to security deposits in those pertaining to last month’s rent are different. Because of this, it is critical that you properly document exactly why you are taking the funds from the tenant. Best case practices is to clearly define on the memo line which payment is for rent, security deposit or last month rent. It is also good practice to have the tenant provide you a separate check for each of the types of funds they are providing you. This could certainly save you a lot of headaches in court, by simply denoting on the check or on a receipt provided to the tenant, what the money is allocated for.

The laws pertaining to last months rent and security deposit are only valid for residential purposes. These laws exclude commercial property and vacation property which will be used for 100 days or less.

Pet fees and pet deposit are not allowed unless it is part of the security deposit. An additional fee for a pet is not allowed, unless it is specifically enumerated in the lease and is not listed as an additional rent, simply that it is part of the rent.

Downloads (for informational purposes only):

Rent-and-Security-Deposit-Receipt Form

Apartment Condition Statement Form

Sample_Lease

 

Massachusetts Security Deposit Law and Cases:

https://malegislature.gov/laws/generallaws/partii/titlei/chapter186/section15b

http://masscases.com/cases/app/21/21massappct758.html

http://masscases.com/cases/distapp/2009/2009massappdiv267.html

https://law.justia.com/cases/massachusetts/supreme-court/volumes/390/390mass275.html

http://masscases.com/cases/app/75/75massappct411.html

http://masscases.com/cases/app/69/69massappct77.html

 

Joseph F. Botelho, Esq.
BOTELHO LAW GROUP
Attorneys At Law

901 Eastern Ave.
Unit 2
Fall River, MA 02723
Office:  888-269-0688

https://www.botelholawgroup.com/