Section Four: The Security Deposit - Maryland PIRG Student Chapters

Section Four: The Security Deposit

A security deposit is any money that is given to the landlord by the tenant to protect the landlord against unpaid rent or damages to the premises. Any rent that is paid in advance is considered part of the security deposit and is subject to all the restrictions listed below. Usually the money is deposited with the landlord when signing the lease and is invested and returned after the tenant moves out.

Maryland law provides the tenant strong protection against landlord abuse of the security deposit. The laws and penalties apply to deposits given under both oral and written leases. The tenant should insist upon these rights and take follow-up action if the landlord delays or improperly withholds the security deposit. Similarly, the tenant cannot defeat the purpose of the security deposit by using it for the last month’s rent.

MOVING IN

MAXIMUM AMOUNT
The total amount of the security deposit may not be more than two month’s rent or $50; whichever is greater. If the tenant is charged more, s/he may recover from the landlord up to three times the excess amount and reasonable attorney’s fees. The tenant may demand refund of this excess at anytime while s/he lives in the rental property or within 2 years after s/he moves away. For example, if the rent is $200 per month and the landlord charges $200 security deposit and 2 months’ advance rent, the total of $600 illegally exceeds the two-month maximum of $400. The tenant may sue immediately for 3 times the excess (3 x $200) and recover up to $600.

RECEIPT TO TENANT
The tenant must receive a receipt for the security deposit, although this may consist of a clause written into the lease. The receipt (or statement in the lease) must inform the tenant of his/her right to receive from the landlord a list of all existing damages (described below). The tenant should ask for this receipt and look for such a clause in the lease (although a request is not required). If the landlord fails to provide such a receipt, state law entitles the tenant to $25.

LIST OF EXISTING DAMAGES
Money may be deducted from the security deposit at the termination of the lease for damages to the property. In order to protect the tenant from later paying for damages that already existed when the tenant moved in, THE TENANT SHOULD, WITHIN 15 DAYS OF MOVING IN, MAKE A WRITTEN REQUEST FOR A LIST OF EXISTING DAMAGES. Note that the tenant must ask for this list. If the landlord does not give the list promptly s/he is liable for three times the full security deposit. Even if the landlord does supply such a list, it is a good idea for the tenant to prepare his/her own list (including damaged or worn items), which should be witnessed and signed by a third party and sent to the landlord. It is best to send this letter by certified mail, requesting it be included in management files. If there is any disagreement, both parties should check the property together. It's also recommended that photographs be taken.

INTEREST ON THE SECURITY DEPOSIT

After the landlord receives a security deposit, s/he must deposit it in a Maryland bank within 30 days. This deposit must be in a separate interest-bearing account that contains only security deposit money. If the deposit was $50 or more, simple interest of 4% per year will accrue to the tenant at six-month intervals from the time the tenant paid the deposit.

MOVING OUT

INSPECTION OF PREMISES WHEN MOVING OUT
The tenant has the right to be present when the landlord inspects the premises for any damages at the end of the term. THE TENANT MUST NOTIFY THE LANDLORD BY CERTIFIED MAIL OF HIS/HER INTENTION TO MOVE, THE DATE OF MOVING AND HIS/HER NEW ADDRESS. NOTICE MUST BE SENT 15 DAYS PRIOR TO DATE OF MOVING. The tenant should expressly request the landlord to inspect for cleanliness and damage in the tenant’s presence.

WITHHOLDING THE DEPOSIT
The landlord is entitled to keep all or part of the deposit for expenses actually incurred by him/her due to the fault of the tenant in damaging the premises or failing to pay rent. Any unpaid rent for the remainder of the term may usually be withheld.

Many tenants lose their security deposit by moving out in the middle of the term or by not sending the required termination notice within the proper time. (See Section 7). If the tenant, upon moving out, does not give 30 days written notice when required, for example, s/he may be held liable for rent even though s/he is no longer living in the apartment. The tenant should notify the landlord through certified mail. In response, the landlord should inform the tenant of the time and date of the moving our inspection through certified mail. The inspection should be within 5 days before or after the day the tenant actually moves out. The landlord, however, cannot deduct the full amount of the unpaid rent if s/he later re-rents the premises before the end of the rental period. In this case, rent received from the new tenant reduces, dollar for dollar, the amount that the landlord can deduct on the grounds of unpaid rent. In other words, the landlord cannot charge twice during any overlapping terms, but rather can deduct only the cost of his/her actual loss.

The landlord may also deduct for utility bills owed by the tenant, damages caused by the tenant’s violation of lease terms, or for unusual or unexpected damages to the property. The cost of repairing broken windows or holes in the walls or floors, for example, may properly be charged to the tenant and deducted from the deposit. However, the physical deterioration claimed must be more than ordinary wear and tear (such as worn rugs, rusted screens, or slightly frayed furniture) in order to be deductible from the security deposit.

A security deposit may not be forfeited automatically by breach of the lease by tenant. A landlord may only deduct the amount by which s/he is actually damaged by the breach.

NOTICE OF WITHHOLDING TO TENANT
The landlord has a duty to promptly inform the tenant of the reasons why the full amounts of the security deposit will not be returned. If the landlord intends to withhold any part of the security deposit, s/he must send to the tenant’s last known address within 30 days after the lease has ended, an itemized list of his reasons and the actual cost for each item. The landlord who fails to provide the list within 30 days loses his/her right to keep any part of the security deposit for damages.

NOTE: The tenant should closely scrutinize any list in which the cost of damages claimed exactly equals the amount of the deposit plus interest to make sure the landlord is not attempting an illegal forfeiture.

RETURN OF DEPOSIT AND INTEREST
After the lease is terminated, the landlord has only 45 days in which to return to the tenant the security deposit and interest minus any amount properly withheld. Simple Interest of 4% per year is due on any deposit of $50 or more. The landlord is liable to the tenant for up to 3 times the amount withheld, plus reasonable attorney’s fees, if s/he fails to return any part of the deposit within this period without good reason.

ADDITIONAL TIPS FOR GETTING BACK THE DEPOSIT
The tenant should clean the apartment before leaving whether required to do so by the lease or not. Be sure to clean the bathroom walls, the kitchen appliances (including the range and oven), all floors, and all furniture. When the landlord makes the final inspection of the premises, the tenant should insist on being present and should try to get the landlord and/or witnesses to sign a statement about the condition of the property. Taking photographs is also a wise precaution. Before the tenant moves out, s/he should have a friend check the condition of the apartment in case court witnesses are later needed.

Many tenants may have serious problems recovering all or part of their security deposit. The most frequent problem involves proof of the condition of the rental property at the commencement of the tenancy compared to the condition at the termination of the tenancy. The best way to avoid this problem is to keep complete records of all transactions between landlord and tenant. This is especially important if the tenant finds it necessary to bring an action in Small Claims Court to recover the security deposit.

Small Claims Court is designed to handle lawsuits to recover sums of money up to $500. There is no need to hire an attorney because the judges don’t follow the formal courtroom rules and procedures. Both parties tell their stories to the judge informally.

However, it is important to be prepared and to have your case documented. For this purpose, the tenant should keep the following items in a safe place:

The receipt and/or cancelled check showing that the security deposit has been paid.

A copy of any written lease or rental agreement.

A copy of the written request for a list of existing damages made by the tenant within 15 days after moving in.

The landlord’s list of existing damages.

The tenant’s own list of existing damages signed by the landlord and/or witness.

Any photographs taken of the property.

A copy of the tenant’s notice to quit.

Any signed statement by the landlord and/or witness concerning the condition of the property upon the tenant’s termination.

In order to have records of correspondence between the landlord and tenant, any letters sent to the landlord should be sent Registered Mail, Return Receipt Requested. This will guarantee that the landlord actually receives the letter. The tenant should keep the return receipts with the above materials. A sample letter demanding return of the security deposit is included in the Appendix.