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.

Advertisements

3 Comments

Filed under Uncategorized

3 responses to “5 Biggest Mistakes Landlords Make # 1: Accepting a Security Deposit

  1. Ronnie The Renter

    Give me a break, this is a ridiculous post. The only reason why it’s a “nightmare” for landlords is because they truly believe they are “lords” and do not have to follow the law.

    I have been renting since 1997 and between 1997 and 2006, I never received one single security deposit back, over a span of six different residences, even though I left every single apartment immaculate, and always paid my rent on time. Not one landlord even bothered to submit a statement as to where the funds were kept, safe from their creditors.

    Even *with* the 3x rule provided for by 93A, most landlords just don’t care. I’ve had landlords who refused to secure front doors so they could lock, landlords who refuse to mow the lawn until it was knee high, landlords who have assaulted me, demanded entrance to the apartment for no reason, the list goes on and on. Landlords simply do not care about the law, they feel that as property owners you should be THANKING THEM for staying on their property, even though you’re coughing up a check to them every month.

    The reason why this rule was instituted in the 70s was because landlords realized that no one would ever bother suing them for 1x the damages. I haven’t sued any of my previous landlords, even with the 3x provision, because it just isn’t worth my time. I am busy and don’t have years to spend in court.

    The bottom line is that compliance is not that difficult – open a seperate bank account, do a statement of condition, and detail any damages you may have to fix when tenants move out. If landlords can’t handle this as part of their normal operations, they have no business being in business.

    • Hey Ronnie – Sorry for the delay in responding to your comment. It’s been a busy year.

      In response to your comment and my “ridiculous” post..Just last month I obtained a 14,400.00 judgment against an

        attorney

      Landlord for failure to deposit funds in accordance with the statute.

      The last sentence of your post underscores people’s ignorance of the law in thinking that it’s “simple” to comply.

  2. Dean Srahman

    Attorney Keramaris,
    This log entry of yours is awesome and perfect captures the heart of the issue.

    Have you ever met a bank employee who did not get a deer in the headlights look when they were told that the account needs to be in the tenants name, but only the landlord can move money in and out of the account? (This is more than a rhetorical question; if you can actually recommend such a banker, I would greatly appreciate it).

    Thank you,
    –Dean

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s