Security Deposits in Massachusetts: What Landlords Need to Know Security Deposits in Massachusetts: What Landlords Need to Know
It's important for landlords and property managers operating in Massachusetts to know about security deposit law specific to the Commonwealth to ensure they remain in compliance and maintain good relations with their tenants. The information provided by the Executive Office of Housing and Livable Communities has provided that helpful guide, and we are pleased to provide this summary.
Below, we'll dive into what Massachusetts landlords are allowed to collect from tenants in the form of security deposits, what the security deposit protects the landlords against, how the security deposit must be held, when the security deposit must be returned to the tenant, and more!
What is a Security Deposit in Massachusetts?
In Massachusetts, a security deposit is a payment a landlord collects from their tenant to help protect themselves against financial or material damage caused by the tenant. Security deposits are collected along with first month's rent and last month's rent (depending on the terms of the specific lease agreement) at the time the lease is signed and before the tenant moves into the property.
What Does a Security Deposit Protect Landlords from in Massachusetts?
As mentioned above, security deposits protect Massachusetts landlords against unpaid rent and/or damage caused to the landlord's property by the tenant. Massachusetts security deposit law states that landlords can deduct from the balance of a security deposit for unpaid rent, unpaid increases in real estate taxes obligated to be paid under a valid tax escalator clause in the lease, damage caused by the tenant necessitating repairs (reasonable wear and tear excepted), and damage caused by pets.
Security Deposit Receipts and Interest in Massachusetts
Massachusetts law stipulates that landlords must hold security deposits in a dedicated, interest-bearing account at a Massachusetts bank. Landlords must also provide their tenants with a receipt for their security deposit payment within 30 days that outlines the name of the bank the money is being held at, the account number, the amount of the deposit, and a statement declaring that the tenant is entitled to all interest received from the Bank where the deposit has been held if they live in the apartment for at least one year.
Landlords must also pay interest on the security deposit of either 5 percent or whatever lesser amount is received from the bank where the deposit is being held if the tenant lives in the apartment for at least a year. Interest on the security deposit needs to be paid to the tenant yearly on the anniversary date of their tenancy. Landlords must notify their tenant of the amount of interest owed to them, and either pay the amount to the tenant directly or allow them to deduct the amount from their rent payment. Once tenancy is terminated, any interest owed to the tenant must be paid within 30 days.
When Landlords Must Return Security Deposits in Massachusetts
Security deposits have to be returned to tenants within 30 days following the end of a lease agreement with any deductions based on damages or unpaid rent detailed in writing. However, in Massachusetts, in certain scenarios, tenants are entitled to the immediate return of their security deposit.
This includes if a landlord:
- Fails to make prepayment records available to tenants during business hours.
- Fails to provide the tenant the bank information where their deposit is being held within 30 days of receipt of the deposit.
- Makes any deductions to the deposit without submitting the proper documentation.
- Use a rental agreement with provisions that conflict with prepayment laws and attempt to enforce it or force the tenant to waive their rights.
Furthermore, landlords risk having to make the immediate return of a tenant's security deposit and potentially paying triple damages, court costs, and attorney fees if they:
- Fail to place the deposit in a dedicated interest-bearing account in a Massachusetts bank
- Fails to transfer the security deposit to a new landlord
- Fails to return the security deposit within 30 days following the end of a rental agreement
Massachusetts Security Deposit Damage Deductions
As mentioned above, Massachusetts landlords must return a tenant's security deposit no more than 30 days following the end of their tenancy. However, there are certain scenarios where a landlord may deduct from the full amount of the security deposit before returning it to their tenant when there is:
- Unpaid rent
- An unpaid increase in real estate taxes (if it must be paid by tenant under the terms of the lease)
- Damage caused by the tenant necessitating repairs beyond normal wear and tear
- Pet damage
If the landlord's property has been damaged by the tenant in a way which leads to a deduction from the tenant's security deposit, the landlord must provide the tenant a detailed list of the damages and corresponding repairs (including estimated costs) within the same 30-day timeframe following the end of tenancy.
Security Deposit Transfer to a New Landlord
Another common question related to security deposits is how to handle a deposit in the event that a building is sold to a new owner. In Massachusetts, the existing landlord needs to credit the security deposit and last month’s rent, along with any accrued interest owed to the tenant, to the incoming landlord. It is then the responsibility of the incoming landlord to notify the renters about the transfer in writing within 45 days of receiving their deposit.
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Simply open an account with our easy-to-use digital platform ZDeposit, invite your tenants to join, and sit back and relax knowing your security deposits are being held and managed correctly while at Leader Bank!
*The preceding does not constitute legal advice, and landlords and tenants are encouraged to seek legal assistance in specific cases of concern or dispute.
