Boston Landlord Education: How to Handle Security Deposits - Article Banner

Collecting a security deposit from your tenants before they move into your Boston rental property is an essential part of the process. It protects you and your property against a loss of rent if those tenants break the lease and it also helps you pay for any damage that goes beyond normal wear and tear. Always collect this deposit before signing the lease and handing over the keys. It should be collected with any other move-in funds, including the first month’s rent.

While the money your tenant pays in a security deposit remains their money, it’s an extra layer of financial protection that you can use if necessary. Good tenants will want to receive their entire deposit back, so they’ll be careful about keeping the home clean and well-maintained. 

Massachusetts has statewide laws which address security deposits, specifically what they can be used for and when they need to be returned. In Boston, there are some additional requirements that fall to the tenants when they’re preparing to move into a property. 

In our experience as Boston property managers, most tenant and landlord disputes arise because of a disagreement over the security deposit. We think it’s important that you know how to handle security deposits and how you can avoid conflicts with your residents and potential court cases. 

What You Can Collect as a Boston Security Deposit

By law, you are permitted to charge a security deposit that’s no more than the equivalent of one month’s rent. So, if your monthly rent is $2,500, your security deposit cannot be more than $2,500. 

However, Boston landlords are able to collect both the first and the last month’s rent before a tenant moves in, so that provides you with a bit of flexibility if you’re worried about your tenants moving out before the end of the lease term. You’ll have that deposit and you’ll also have the last month’s rent. Collecting both the first and last month’s rent is attractive to many owners because some tenants won’t pay the last month, believing they can simply use the security deposit to pay for the last month they’re in your property. This should never be permitted. 

Just because you’re entitled to collecting the last month’s rent with the security deposit doesn’t mean you have to. If the market is competitive and you’re working hard to attract good tenants, you might want to settle for getting just the security deposit in addition to the first month of rent. 

Another unique benefit to rental property owners in Boston is that you can also charge tenants a fee to buy and install new locks. It’s important for security purposes to re-key your property between tenants. This cost can be transferred to your tenants so you can cover the expense of providing a new lock and key.

Where You Should Hold Your Boston Security Deposit

Once you collect the security deposit, you’ll need to decide where to keep it. There are laws that address this, also. You cannot simply deposit it into your own personal checking or savings account until the end of the lease. 

Property owners need a separate, interest-bearing account in a Massachusetts bank for the security deposit that’s collected from Boston tenants. You’ll also have to provide your tenants with a receipt that reflects:

  • The amount of the deposit. 
  • Your contact information as well as contact information for your tenant.
  • A description of the home that’s being rented. 
  • Name of the Massachusetts bank and the account number that’s holding the deposit. 

Once you have collected the security deposit and put it in the designated account, you’ll need to provide your tenants with a “Statement of Present Condition” notice. This is a list of any defects or damage already in the rental home. If your tenant disagrees with it or has other items to add, a tenant must dispute the notice in writing within 15 days of receiving it.

Interest must be paid on the security deposit, but only for tenancies that last a year or longer.

How to Apply the Security Deposit

This is where things can get sticky. As the owner of the rental property, you need to understand what you can charge the deposit for and what you cannot charge the deposit for. Sometimes, the line seems very thin. 

Here are some of the things you can and cannot use a Boston security deposit for:

YES List:

  • Unpaid rent

If a tenant falls behind and never really catches up, you can use the security deposit to bring the account current after the tenant leaves. Perhaps they didn’t pay the full rental amount for a few months but then continued to pay rent on time and in full as normal. You can apply the security deposit to those months that were short after your tenants move out. 

This should never be offered to tenants as a way to manage their rental payments. The deposit isn’t meant to cover rent during the tenancy.  

Using the deposit to pay for rent when tenants break the lease and leave the property suddenly and without notice is also permissible. The deposit, in this case, can make up for the income you’ve lost. However, work quickly to find a new tenant so you don’t have to worry about months and months of vacancy loss. The security deposit will only cover you for so long. 

  • Unpaid utility bills

If a tenant moves out and the utility accounts are overdue, you might have a hard time getting the tenants who have already moved out to catch up with those electric or water bills. You can use the tenant’s security deposit to pay for any overdue or unpaid utility bills. 

  • Cleaning fees

Everyone has different standards for cleaning. In the cases of rental properties, the standard should be how the property looks during move-in. That’s the point of the move-in inspection; to document the present condition of the property and establish how it should look when possession is returned to the owner. 

If the tenants move out and you find that there’s trash left behind or not everything has been moved out, you will have to pay to make the rental home appealing to new tenants. The security deposit can help cover any cleaning costs that should have been your tenant’s responsibility. 

  • Property damage

Property damage can be caused by abuse, misuse, and neglect of the property. It clearly goes beyond wear and tear. While small nail holes cannot be deducted, large holes in the walls or floors can absolutely be deducted from the security deposit. Scratches on the floor or stains in the carpet are examples of damage. If a refrigerator no longer works because a child was hanging on the door, that’s a repair you can deduct from the deposit. 

NO List

  • Wear and Tear

Normal wear and tear is your responsibility as a landlord. You cannot charge a tenant for those small nail holes in a wall where paintings or pictures were hung. You cannot charge for the scuff marks on the floor or against the wall where furniture sat for a year or longer. Caulk in the tiles is likely to chip away or grow mold and you’ll have to deal with that at your own expense. 

Returning a Boston Security Deposit

Return Security DepositThe security deposit law in Boston and throughout Massachusetts states that landlords, owners, and property managers must return the deposit to their tenants within 30 days from lease termination, or when those tenants leave the property.

If you are fortunate to have had good tenants who took care of the property and left it looking great, you’re going to return the full deposit. Before your tenants leave, ask for a forwarding address. Send the deposit back as quickly as possible. 

When you find you need to make deductions from the deposit, make sure you are detailed and specific. You’ll have to provide a written statement and itemized list of what you’re deducting and why. If you fail to send this accompanying statement with a partial refund or no refund, you forfeit your claim to the amount of the security deposit you were trying to withhold.

Always return the security deposit to your departing Boston tenants on time. Otherwise, your tenants can take you to court, where you may be ordered to refund the entire deposit and pay a penalty up to three times the amount you withheld. Plus, you could face additional court costs and legal fees. 

Protect yourself by carefully documenting the condition of the property before the tenant moves in and after the tenant moves out. This will clearly demonstrate what things looked like before the resident took possession and after. It could keep you out of court. 

We know that there’s often a lot of anxiety around the security deposit, and given the detailed laws that govern how it’s collected, where it’s held, and how it’s returned – that’s understandable. Don’t waste time and resources trying to avoid mistakes. Get some help from a Boston property manager instead. We can be a great resource for you. Contact us at Platinum Realty Group.