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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