Stephen Ryan, Esq., MAR General Counsel, addresses questions and issues raised on the Legal Hotline, available to designated REALTORS® weekdays from 9 a.m. to 1 p.m. at 800-370-5342.
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Take a Deposit, or Not
Q. My lawyer friend advises many of her landlord clients to seriously consider not taking a security deposit with their rentals since the law is complicated and the penalties for failing to properly hold the money are severe. Does this make sense?
A. For some, but not all, the answer may well be “yes.” The attorney has a valid concern for the perils of noncompliance with the law.
For many landlords, even experienced ones, the laws regarding security deposits remain confusing. Sadly, many landlords fi nd out too late that they have not properly complied with the laws at the time of a tenant’s departure from the unit, either when the tenant is leaving at the end of his rental period or as the landlord is attempting to evict the tenant for nonpayment of rent. The threat of treble damages and attorneys’ fees for mistakes in handling a security deposit has resulted in at least some attorneys advising many landlord clients with smaller properties to seriously consider not taking a security deposit at all.
This is a quick summary of what is required of a landlord:
- the deposit cannot exceed one month’s rent;
- a receipt for the deposit must be given to the tenant when he provides the deposit;
- within 10 days of receiving the deposit, a statement of condition must be given to the tenant;
- within 15 days of giving the statement of condition to the tenant, the landlord must receive a signed copy from the tenant;
- within 30 days of receiving the deposit, the funds must be placed in an
interest-bearing Massachusetts bank account, separate from the landlord’s
own funds, and the tenant must be given a receipt for the deposit;
- every year on the anniversary of the creation of the tenancy, the landlord
must pay the tenant the interest that has accrued on the money, or notify him in writing that he may deduct that amount from his next rent payment. Either way, a written statement regarding the accrued interest must be given.
When the tenant is leaving, the landlord should:
- calculate the unpaid rent due;
- check for damage to the unit immediately after it becomes vacant;
- repair damage, if any, to the unit (note that reasonable wear and tear is not considered “damage”);
- give the tenant a Statement of Security Deposit and Itemized Damages, if any, and return to him the balance, if any, from the deposit or a demand for the balance due the landlord if the amount exceeded the deposit.
There is a lot more landlords need to know in order to both keep and use the last month’s rent and security deposits properly. For this reason, MAR’s legal department recommends that REALTORS® consider providing the “Landlord’s Rights & Responsibilities” brochure to their
customers who purchase rental property. It is a well-written summary of the basics of Massachusetts landlord-tenant law prepared by the Massachusetts Office of Consumer Affairs and Business Regulation. Free downloadable copies of this brochure may be accessed on the Legal page of marealtor.com.
While the brochure will not make a new landlord an expert on all rental
issues, it can go a long way toward helping him understand a landlord’s
obligations. |