Several years ago the Greater Salem Landlord Association held an informative meeting about Security Deposits: "A Trap for the Unwary Landlord" that was extremely helpful in clarifying the Massachusetts General Law, Chapter 15b that governs the proper handling of security deposits.
A word of advice if you do not know the rules for handling a security deposits and are not interested in learning the rules, DON’T TAKE A SECURITY DEPOSITS. Any misstep in handling a security deposit by a landlord, however innocent, under the complex Massachusetts last month’s rent and security deposit law can subject a landlord to far greater liability than the deposit, including penalties up to triple the amount of the deposit and payment of the tenant’s attorneys’ fees.
If a deposit is necessary, take a last month’s deposit, the requirements of which are less strict than security deposits. Here is an overview of the security deposit law:
The following steps must be followed when a landlord holds a security deposit:
When the deposit is tendered, the landlord must give the tenant a written receipt which provides:
the amount of the deposit
the name of the landlord/agent
the date of receipt
the property address.
Within 30 days of the money being deposited, the landlord must provide the tenant with a receipt identifying the bank where the deposit is held, the amount and account number.
Within 10 days after the tenancy begins, the landlord must provide the tenant with a written “statement of condition” of the premises detailing its condition and any damage with a required disclosure statement;
The tenant has an opportunity to note any other damage to the premises, and the landlord must agree or disagree with the final statement of condition and provide it to the tenant.
The security deposit must be held in a separate interest bearing account in a Massachusetts financial institution protected from the landlord’s creditors.
The landlord must pay the tenant interest on the security deposit annually if held for more than one year.
The security deposit may only be used to reimburse the landlord for unpaid rent, reasonable damage to the unit or unpaid tax increases if part of the lease. Security deposits cannot be used for general eviction costs or attorneys’ fees. Within 30 days of the tenant’s leaving, the landlord must return the deposit plus any unpaid interest or provide a sworn, itemized list of deductions for damage with estimates for the work. Only then can the landlord retain the security deposit.
