Massachusetts Security Deposit Law - Is it worth the aggravation?

Question

-I've been reading a lot on here about how to handle security deposits when it comes time to assess damage and determine what is normal wear and tear and what is "damage" that can be charged against the security deposit. In, Massachusetts, this is a really sticky situation.

The security deposit has to be kept in an interest-bearing account and the interest has to be accounted for when a tenant moves out or when the property is sold. When a security deposit is taken, the landlord must provide the tenant a receipt with the amount of the deposit which can not exceed the amount of one month's rent. A statement of conditions must be filled out detailing existing damage and the condition of the rental unit at the time of receipt of the security deposit. Within 30 days of receiving the deposit, the landlord must give the tenant the name of the bank where the deposit is being held and the account number.

If the landlord does not follow all of the above rules when handling a security deposit, he is liable for damages equal to triple the value of the security deposit (treble damages)

There are a few more things that landlords should know but you should be getting the point that in MA, it's a big deal for landlords to properly handle the security deposit.

So my question is this....

How many of you landlords in Massachusetts choose not to even collect security deposits? (I will raise my hand on that.) I choose not to as I don't want to have to follow all of the above rules.

I've had a couple of instances where damages have exceeded the amount of the security deposit I could have collected but in reality the cost to hire an attorney to fight it and the time I would have spent dealing with this tenant any further support my thinking that it's just not worth dealing with all the rules and regulations.

I'm thinking this could be an upcoming blog post and would love to get some comments to use from other landlords.

What are your thoughts on security deposits? Did you even realize there were all these steps you had to follow if you are going to collect a security deposit?

Eric Dubrule · Answer

@Eric Dufault thanks for sharing that link. Great information in there. @Rob Beland I require security deposits. It's not too much extra effort, but still a hassle nonetheless. My thought is that a tenant who is able to provide 3 months rent will be a better (paying) tenant than one who is only able to come up with the first and last. I also believe they are more likely to take better care of the apartment. Someone might be able to help me out on who to give the credit to, but the best advice I've received was to provide a sheet at move-in which lists the costs of all repairs upon move-out. If there is a hole in a screen, a broken door knob, stain in a carpet,,, the tenant knows that my intention is to charge them for it. That said, with the ridiculous laws in Mass I may not decide to withhold a portion of the security deposit it's only, say $100 worth of repairs- just to avoid the potential for a lawsuit.

George Paiva · Answer

Yes in CT its a pain as well. You can only legally collect 2 months rent for security or if Tenant is 65 or older 1.5x rent. It also has to be a interest account as well. Unfortunately the market only lets us collect about a months rent and then 99% tenants figure on using it to pay last months rent. So they leave you holding the last months rent and an apartment requiring major clean up for turnover. I've been trying to minimize my damages by only renting to good tenants ie at least 3x Income to Rent, 700+ credit, no evictions, no felonies... Hard to do in our market lately and have been holding vacancies up to 3 or 4 months on some places. And my rental rates are at the low end. Sorry for the ranting, just my experience in the last year... At least we don't need all that documentation and legal paperwork trail like in Mass...

Eric Dufault · Answer

Good Link for Legal Issues for Property Owners in Mass. http://www.attorneyross.com/landlord.html#23

Jonathan Pliszka · Answer

Can you collect a non-refundable "move-in fee" in lieu of the security deposit? We're seeing that more and more in Chicago with the large property management players. They'll bypass the security deposit altogether and collect $250-400 per adult occupant.

Steve Nowak · Answer

I don't plan to require a security deposit going forward from future tenants. My understanding is that the security deposit law is designed primarily to protect the tenant, not to protect a landlord's property, and it's too easy to make an unintentional mistep. For example, when retaining all or part of a deposit, a landlord has to sign a statement that specifically says, "under the pains and penalties of perjury." Also, the statement of condition needs to be in 12 point bold face font type. I might instead require last month's rent. Or nothing other than first month's rent.

Donald M. · Answer

I have been renting property in MA for 5 years and I never knew about nor complied with any of these rules. I would return the security deposit if there was no damage. None of my tenants called me on anything or knew any of these rules as well and I've had great relationships with all my tenants. Now finding out about these rules, I'm a bit hesitant to provide information on the location of the deposit, etc, and pay interest (have never kept deposits in interest-bearing accounts) at the end of the lease because then each of my tenants are going to demand it from their future landlords, causing all kinds of increased documentation! I doubt that non-professional landlords (and ppl outside of BP) are aware of these rules, and I think it would be too much hassle for tenants to go after landlords as well, but I think I will start a system for complying now that I know about this.

Lynn McGeein · Answer

In Annapolis, we have to pay a certain interest on the security deposit, think it's 3%, even if the account doesn't pay that. Must be in escrow account, must provide receipt and statement of conditions and they have the 3x penalty thing here as well. Also, no discrimination against income (so can't just opt out of Section 8 without other reasons), and Annapolis has a really weird rule about 1-year leases and special circumstances must be met for not offering a tenant a 1-year lease. We also have to provide a smoke alarm diary or something, detailing when we installed, changed alarms, etc. Oh, and that's all after the $100 annual permit and inspection fee the city charges. I read where they just fought down a bill to control rents, but looks like it could become an issue soon as well. Just some of the reasons we're mainly investing in Raleigh, not Annapolis.

Michael Eastland · Answer

@Mike Hurney I know, that's why I am halfway to New Hampshire, will get there full time some day :)

Robert Adams · Answer

I would collect the 1st, last, and sec deposit and handle the accounting properly. The accounting is a lot less headache than chasing after the money for damages etc after the fact.

Mike Hurney · Answer

@Michael Eastland Hey venting guy, Connecticut ain't that far behind us! Welcome;-)