Security Deposits

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What is a Security Deposit?

A “security deposit” is any payment of money, including the last month’s rent paid in advance, that the tenant pays to the landlord to protect the landlord from non-payment of rent, damage due to breach of the lease, or damage to the rented unit, common areas, major appliances or furnishings.

Read the Law: Md. Code, Real Property 8-203

 

Maximum Amount

The most the landlord may charge as a security deposit for each unit is two month’s rent, regardless of the number of tenants. If the landlord charges more than this, the tenant may get back up to three times the extra amount charged, plus reasonable attorney’s fees. The tenant’s can sue to get back this amount at any time during the rental period or within two years after the end of the rental period.

Read the Law: Md. Code, Real Property 8-203

 

Receipt

The landlord must give the tenant a written receipt for the security deposit. The landlord is liable for $25 if the landlord fails to do so. The receipt may be included in the written lease.

The receipt must contain the following information:

  • Tenant's right to have the unit inspected by the landlord, with the tenant present, in order to make a list of damages that exist at the start of the tenancy - the tenant must request this inspection by certified mail within 15 days of the tenant’s occupancy.
  • Tenant's right to be present when the landlord inspects the unit at the end of the rental period in order to determine if any damage was done to the rental unit during the rental period - the tenant must request this inspection by certified mail at least 15 days before the day the tenant intends to move. In the tenant’s request, the tenant must tell the landlord of the tenant’s intention to move, intended date of moving, and new address.
  • The landlord must conduct the inspection within 5 days before or after the tenant’s intended move date.
  • The landlord must notify the tenant, in writing, of the date of the inspection.
  • The landlord must give the tenant a written list of the charges and actual costs against the security deposit the landlord is claiming, within 45 days after the end of the rental period. The landlord must send this written list to the tenant by first-class mail to the tenant’s last known address.
  • The landlord must return any unused portion of the security deposit within 45 days after the end of the rental period. The landlord must send any unused portion by first-class mail to the tenant’s last known address.
  • A statement that the landlord’s failure to comply with the security deposit law may result in the landlord being liable to the tenant for a penalty of up to 3 times the security deposit kept, plus reasonable attorney’s fees.

The landlord must keep a copy of the receipt for 2 years after the end of the rental period, eviction, or abandonment of the property.

Read the Law: Md. Code, Real Property § 8-203.1

 

Bank Account

The landlord must keep all security deposits in federally insured financial institutions that do business in Maryland. The account must be exclusively for security deposits and bear interest. The landlord can also hold the security deposits as insured certificates of deposit. The landlord must deposit each security deposit in that account within 30 days after receiving it. If the landlord owes any person money, that person cannot use the security deposit to be repaid. 

Read the Law: Md. Code, Real Property § 8-203; Financial Institutions § 1-101

 

Return of the Deposit to Tenant; Interest

The landlord must, within 45 days after the end of the rental period, return to the tenant the security deposit minus any amount which the landlord may rightfully keep.  Simple interest of the greater of the US Treasury yield curve rate or 1.5% per year must be paid on security deposits of $50 or more and must accrue each month from the day the security deposit was given, after the security deposit has been held for 6 months.  A security deposit calculator is available at the website of the Department of Housing & Community Development.

Interest is not compounded.

If the landlord, without a reasonable basis, fails to return any part of the security deposit within 45 days after the end of the rental period, the landlord may be liable to the tenant for three times the withheld amount, plus reasonable attorney’s fees.

Read the Law: Md. Code, Real Property § 8-203

 

Withholding of Deposit

The landlord may keep any portion of the security deposit for unpaid rent, damage due to breach of lease or damage by the tenant or the tenant’s family, agents, employees, guests or invitees in excess of ordinary wear and tear to the leased premises, common areas, major appliances, and furnishings owned by the landlord.

If the tenant notifies the landlord, by certified mail, that the tenant intends to move out, the date of moving, and their new address, the tenant has the right to be present when the landlord inspects the premises to determine if any damage was done. The tenant must mail the notice at least 15 days prior to the date of moving. The landlord must then notify the tenant, by certified mail, of the time and date of inspection, which must be within 5 days before or after the tenant’s move.

If the landlord fails to notify the tenant, in writing, at the time of payment of the security deposit of tenant's rights relating to the inspection, then the landlord loses their right to withhold any part of the security deposit for damages, including unpaid rent.

 If the landlord keeps the security deposit to pay for damage, the landlord must provide an itemized statement of costs. The statement must include supporting documentation. The landlord may provide an estimate. If an estimate is provided, the landlord must notify the tenant (in writing) when the repairs have are complete. This notice should include final invoices for repairs. If the final cost is less than the amount of security deposit withheld, the landlord must return the excess to the tenant. The excess must be returned within 30 days after the repairs are complete. 

If the landlord attempts to use the deposit to cover costs for breach of the leased agreement (including unpaid rent), the landlord can only claim the actual amount of money lost due to the tenant’s breach. If the landlord re-rents the property before the end of the tenant’s term, then the actual damages are reduced by the amount gained from the new agreement.

Read the Law: Md. Code, Real Property § 8-203

 

More than “Wear and Tear”

The landlord can only charge for physical damage beyond ordinary wear and tear. This is a common sense rule. For example, if a rug is worn through proper usage, then this is ordinary wear and tear. If a rug is stained with ink, then this is not ordinary wear and tear.

At the end of the rental period, a tenant should carefully clean the rental unit, including all appliances. Have one or two friends, who would be willing to go to court with the tenant, carefully inspect the rental unit, room by room, taking notes as to the condition of the rental unit.  The tenant should also take photographs of the condition of the each room of the rental unit when the tenant leaves the rental unit.

Learn more about ordinary wear and tear.

 

Notice to Tenant

If the landlord withholds any part of the security deposit, the landlord must send to the tenant, by first class mail, to the tenant’s last known address, a written list of the damages the landlord claims, together with a statement of costs the landlord has actually spent to make the repairs. If the landlord fails to do this within 45 days after end of the lease, the landlord loses the right to keep any part of the security deposit for damages.

Read the Law: Md. Code, Real Property § 8-203

 

Tenant Ejected, Evicted or Abandoning

Where the tenant has been evicted or ejected for breach of the lease, or has abandoned the rental unit before the end of the lease, the procedure for return of the security deposit is as follows:

  1. Within 45 days after leaving the premises, the tenant must send to the landlord, by first-class mail, a request for return of the security deposit, and inform the landlord of the tenant’s new address;
  2. Within 45 days of receipt of the notice, the landlord must then send, by first-class mail, a list of damages deducted from the security deposit and a statement of costs actually incurred and must return to the tenant the security deposit with simple interest of the greater of the US Treasury yield curve rate or 1.5% per year, minus any damages properly withheld.
  3. If the landlord fails to send the list of damages, the landlord loses the right to keep any part of the security deposit for damages.
  4. If the landlord fails to return the security deposit as required, the landlord may be liable to the tenant for up to three times the amount being kept, plus reasonable attorney’s fees.

Read the Law: Md. Code, Real Property § 8-203

 

No Waiver

The provision of the laws related to security deposits cannot be waived in any lease. 

Read the Law: Md. Code, Real Property § 8-203

 

What to Do If You Have a Problem with Your Security Deposit

If your landlord has violated the security deposit law, you may sue the landlord in District Court. Your lawsuit must be filed no later than two years from the end of your tenancy. If you file suit against your landlord and hire an attorney to represent you, you can ask the court for attorney’s fees.

Read the Law: Md. Code, Real Property § 8-203

You may want to talk to an attorney about any problem concerning your security deposit. You may be eligible for free legal services or advice from Maryland Legal Aid or a volunteer lawyer program. Learn more about getting help from a legal professional.

You can get the forms you need to file a small claims lawsuit against the landlord at your local District Court or online through the Maryland Courts website. There is a fee to file a small claims lawsuit. You also must have someone serve the papers on your landlord, or, for an additional fee, you or the court can mail the papers by certified mail, restricted delivery, return receipt requested. Learn more about small claims.

You may also file a complaint with the Consumer Protection Division of the Maryland Attorney General’s Office.

 

Surety Bonds

A tenant may use a surety bond to pay the full amount or a partial amount of the security deposit. However, a landlord cannot require the tenant to purchase a surety bond, and the landlord is not required to consent to a tenant's purchase of a surety bond.

The amount of the bond (or if both a bond and another form of payment is used to pay the security deposit) may not exceed two month’s rent per unit. At least 10 days before a landlord makes a claim against the bond, the landlord must notify the tenant by first-class mail. A tenant may choose to fight the claim by sending a written response to the surety within 10 days after receiving the landlord's claim.

Before a tenant buys a surety bond instead of paying a security deposit, the surety providing the bond must disclose to the tenant in writing that:

  1. the payment for a bond is nonrefundable;
  2. the surety bond is not insurance for the tenant;
  3. the surety bond is being bought to protect the landlord against loss due to nonpayment of rent, breach of lease, or damages caused by the tenant.
  4. the tenant may be required to reimburse the surety for the amount the surety paid to the landlord;
  5. even after the tenant purchases the surety bond, the tenant is still responsible for payment of all unpaid rent and damages;
  6. the tenant has the right to pay the damages directly to the landlord or require the landlord to use the tenant's security deposit, if any, before the landlord makes a claim against the surety bond; and
  7. if the surety fails to disclose numbers 1 through 6, the surety loses the right to make any claim against the tenant under the surety bond.

Read the Law: Md, Code, Real Property § 8-203

Source
Fair Housing Action Center of Maryland (Formerly Baltimore Neighborhoods, Inc.) Updated by PLL Contributors, with additional content from Maryland Legal Aid.
Source URL: https://peoples-law.com/security-deposits

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