Why Is It Important for a Landlord to Keep a Security Deposit in an Escrow Account?

In Massachusetts, it is essential for a landlord to properly manage a residential tenant’s security deposit.  When a landlord fails to put a residential tenant’s security deposit into an escrow account, he violates section 3(a) of Massachusetts’ General Law Chapter 186, section 15(B), also known as the Security Deposit Statute.  The penalty for violating this section is that the tenant can demand immediate return of the security deposit—even if the tenant remains in possession of the premises.  If the landlord continues to break the law by failing to return the deposit upon demand, then the penalties increase.  The landlord becomes liable for treble (triple) damages, interest, costs and attorney’s fees. 

Phyllis Patukonis is an example of a tenant who was awarded treble damages, interest, costs and attorney’s fees.  Phyllis had been a tenant in an apartment when William Young purchased it from a prior owner.  The prior owner gave Phyllis’ security deposit to Mr. Young, who breached his duty under section 3(a) of Massachusetts’ Security Deposit Statute to put it into an escrow account.  Phyllis subsequently made a demand for return of her security deposit.  Although Mr. Young eventually did return her security deposit (five months after the demand), and although Phyllis remained in possession of the premises, the Court found that Mr. Young’s failure to adhere to the strict requirements of the Security Deposit Statute meant that he had to pay for Phyllis’ lawyer and the court costs necessary to acquire a judgment against him for triple the amount of the deposit. 

In order to avoid costly sanctions, landlords in Massachusetts who lease to residential tenants must educate themselves concerning the requirements of the security deposit law.  Tenants who want to understand their rights under the security deposit law can also benefit from taking iLaw’s short course.

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Warning #5 Tenant Will Pay Cash.. TODAY

Many people I’ve explained this to don’t understand or refuse to understand the logic behind this warning. But be warned, this is almost a dead give-away that you’re dealing with a deadbeat.

Generally tenants don’t always find themselves in the best situations financially. Aside from some young professionals and students, chances are the person who is renting from you is struggling financially, or at the very least, is on a fixed income. Money these days is so cheap that most people with a steady job can afford to buy their own home and achieve their own version of the American Dream. Of course the “dream” is just a trap, but I won’t get into that here.

Whenever someone comes to rent an apartment from me and suggests paying cash the same day it raises a major red flag in my mind because it suggests that this person needs an apartment immediately. They’re likely trying to pull the wool over my eyes and get me to give them the key. Of course, giving someone the key closes the door on your rights in Massachusetts as a Landlord. Think of the keys as a symbol of your rights. Once they’re transferred so too are your rights as someone trying to bargain at arm’s length.

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Top 5 Warnings Your Potential Tenant is a BAD TENANT

Many of my clients know that I’m not only a Landlord Tenant Attorney, but an active Landlord in Massachusetts. Despite the fact that I’m only 30 years old I’ve been helping manage my family’s residential and real estate since I was 12. My duties over these past 18 years have stemmed from janitorial to maintenance to accounting to legal.

I’ve represented hundreds of Landlords in some pretty nasty evictions. Invariably my clients always ask me something along the lines of “If I’d only known this tenant was going to be so bad..what do you do to screen your tenants?”

My answer is consistent: You can never really know. The common metric landlords rely upon (credit-check) carries little weight in my book. I’ve often rented to people with great credit that have been the most terrible tenants. Likewise I’ve rented to some people that have had terrible credit and ended up being the best tenant.

With that established, I’ve compiled a list of the top 5 warnings, based on my experience as a Landlord and Landlord Tenant Attorney, that you’re dealing with a bad tenant.

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Papadopoulos Decision Increases Property Owners’ Exposure to Slip-And-Fall Claims

With the recent snowfall, property owners have been out shoveling out their driveways and sidewalks very frequently over the past few weeks.  Undoubtedly, many property owners are probably wondering what is their legal duty of care with respect to their sidewalks and other common areas.  In July of 2010, the Massachusetts Supreme Judicial Court heard Papadopoulos v. Target Corp., which involved a slip-and-fall incident on a patch of ice outside the Liberty Tree Mall in Danvers.  Unfortunately for property owners, however, the Papadopoulos decision has increased their exposure to legal liability for slip-and-fall accidents.

The SJC’s decision in Papadopoulos significantly changed the old common law rule, which provided that property owners could not be held liable for accidents on naturally occurring snow and ice accumulations.   Therefore, under the old rule, which was also know as the “Massachusetts rule”, homeowners were only responsible if the snow and ice causing the accident resulted from an “unnatural occurrence“.  Consequently, the Massachusetts rule created an exception to the general rule that a property owner owes a duty to all lawful visitors to use reasonable care to maintain his or her property in a reasonably safe condition.  However, courts applying the Massachusetts rule had to determine the difference between natural and unnatural accumulations on a case-by-case basis, and the distinction was often very unclear.

In Papadopoulos, the SJC held that there is no distinction between natural and unnatural accumulations of snow and ice for purposes of a premises liability in slip-and-fall claims. Consequently, homeowners will now be held liable when they fail to show reasonable care in removing snow and ice from in and around their property.  In a nutshell, all areas where your tenants frequent need to be maintained and kept free from snow and ice.

For an official list of Landlord rights and responsibilities read more here.  Also, you might want to check your insurance policy and ask your representative if you will be covered in the event someone does slip and fall.  Accidents happen, so do lawsuits.

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5 Biggest Mistakes Landlords Make # 1: Accepting a Security Deposit

I can tell you with overwhelming confidence that accepting a security deposit in Massachusetts is the biggest (and one of the most common) mistakes a Landlord can make. If you ever meet an attorney who advises you to take a security deposit on a residential tenancy don’t walk.. RUN out of their office.

Why is this such a big deal? Chances are you know that when a landlord accepts a security deposit they’re supposed to put the money in an escrow account. Do yourselves a favor and take a look at the statute . What’s the first thing you notice about it? How about this? IT’S OVER 4 PAGES LONG.

Whereas something as complicated as the classification and taxation of recreational land statute is just over two paragraphs long, something as simple as the procedures outlining acceptance of a security deposit is 8 times as long. In our practice we have come across attorneys who have been practicing Landlord Tenant Law almost exclusively for over twenty years… when they get they get calls on security deposits they STILL have to look up the statute.

Some important things to keep in mind regarding the security deposit statute in MA:

When the landlord accepts one he/she must (amongst other things):

  • give the tenant a statement of condition on the unit. This statement must also include specific language as stated in section 15B, 2(c).
  • deposit the money in a separate interest bearing account. The landlord is also required to give to the tenant, within 30 days of receiving the deposit, a statement identifying the name and the location of the bank located in Massachusetts in which the security deposit is being held, the amount being held and the specific account number of the deposit.
  • Provide an accounting of the escrow to the tenant yearly or otherwise provide a 5% interest penalty at the end of the tenancy
  • Also, if there is damage in the unit withholding of any security deposit amount must adhere strictly to the statute. This includes providing the tenant written estimates for repair within 30 days of moving out and a statement signed by the landlord under the pains and penalties of perjury that the apartment was damaged.

Probably the most important (and troubling)  part of this evil piece of legislation is the stiff penalties imposed on the landlord for anything other than their strict compliance. The statute makes noncompliance with the statute a violation of GL ch. 93A which exposes the landlord to liability for multiple damages, attorneys’ fees and costs. That means that if the landlord doesn’t comply with the statute perfectly when accepting a $1,500.00 security deposit he/she could be liable for $4,500.00 in damages+Tenant’s Attorneys’ Fees+costs. This is labeled by many landlords in Mass  as the “Security Deposit Nightmare” and many have found themselves in just such a situation. Make no mistake about it, this statute is less about protecting the tenant than it is about punishing Massachusetts Landlords.

If you are a Landlord DO NOT accept security deposits in Massachusetts.  Do yourself a favor and avoid having to call our office to ask for advice on how to go about getting out of your own security deposit nightmare.

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5 Biggest Mistakes Landlords Make # 2: Inadequately Terminating a Tenancy

This is probably the most-often made mistake that Landlords make. Unfortunately, there are a myriad of ways a Landlord can mess this one up, and it’s usually after this happens that I get calls from Landlords. I always suggest that you at least speak with a competent landlord tenant attorney before beginning the process of terminating a tenancy.

If there’s only one thing you take away from this post it should be this: The only goal that Landlords must have in bringing forth a Summary Process Action is to prove to the Court that the tenancy was terminated properly. If there is anything wrong with the Notice to Quit or the Summary process Summons and Complaint, the Court may dismiss the action.. even AFTER judgment enters in the landlord’s favor!

Here are some comon ways the Landlords muck up the Notice to Quit:

1-Sending a 30-Day Notice instead of a 14 and vice versa.

2-Incorrectly listing the tenant’s address.

3-Not providing a cure provision (which allows the tenant to pay back due rent within a certain time period). This is probably the most often made mistake and the one that I actually get calls from other attorneys on.

4-Incorrectly indicating who the Landlord is.

5-Not Signing the Notice to Quit.

6-Not Serving the Notice to Quit properly (via certified mail or constable)

I could list many more. The point is this: Take the time to call an attorney before you begin the eviction process. They’ll charge you little or nothing to prepare the notice for you. Also, you’ll sleep better knowing you haven’t inadvertently made a mistake that could force you to start from scratch.

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5 Biggest Mistakes Landlords Make #3: Retaliatory Evictions

 

Landlords in Massachusetts often engage in what is referred to by statute as a “retaliatory eviction” even when the landlord has no idea what they’re doing is retaliatory or otherwise prohibited. The Commonwealth, through G.L ch. 239 sec. 2A has created a list of tenant activities which are considered protected by statute. These include:

-Petitioning the Court for redress of grievances, the subject matter of the action being the residence or dwelling which they currently occupy;

-Joining a Tenant’s Union or Association;

-Calling the local board of health or health department to complain about the condition of the dwelling, or

-Requesting, in writing to the landlord, that certain repairs be made.

So how exactly are these activities protected? If a Landlord initiates an action to terminate the tenant’s tenancy by either:

(a) Sending the tenant a 14-Day Notice to Quit or 30-Day Notice to Quit, or

(b) Initiates a Summary Process, or

(c) Otherwise engages in some activity that materially alters the tenancy

within 6 months of a tenant engaging in either of the top three protected activities, there exists a rebuttable  presumption that the landlord’s actions were retaliatory. What this means is that if the Tenant asserts retaliatory eviction by means of an affirmative defense or counterclaim, the burden is on the Landlord to prove that the tenancy wasn’t terminated or otherwise altered in retaliation for the tenant’s engaging in the protected activity.

This statute is particularly hard for Landlords to comply will, as recent case law has provided that the statute IS (emphasis added) applicable to non-payment cases. (You read that right attorneys out there).  In other words, what many street-wise tenants will do is first engage in some protected activity, then stop paying the rent.

My Advice: Before you send out that Notice to Quit, make sure you speak to a landlord-tenant attorney. They can review the facts and independently asses whether 239 2A will play a hand if litigation is anticipated.

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