Buying Your First Rental? Massachusetts Security Deposit Rules Every Landlord Should Know
Massachusetts security deposit law is strict, and mistakes can cost landlords triple damages. What new owners of two- and three-families need to know about deposits, last month's rent and taking over existing tenants.
Massachusetts security deposit rules are some of the strictest in the country, and new landlords trip over them constantly. In short: a deposit can't exceed one month's rent, it must be held in a separate interest-bearing account at a Massachusetts bank, the tenant must get specific receipts and a statement of condition, and it must be returned (with interest, minus lawful deductions) within 30 days after the tenancy ends. Getting it wrong can mean paying the tenant up to three times the deposit plus legal fees. Before you collect a dollar, talk to a landlord-tenant attorney.
What can a landlord collect at move-in?
Generally no more than: first month's rent, last month's rent, a security deposit equal to one month's rent, and the cost of a new lock and key. Last month's rent has its own interest rules.
What does the law require for the security deposit?
- A receipt with specific information.
- A separate, interest-bearing account in a Massachusetts bank, protected from the landlord's creditors, with the bank and account number given to the tenant within 30 days.
- A statement of condition of the unit given to the tenant at the start of the tenancy, which the tenant can respond to.
- Annual interest paid or credited to the tenant.
- Return within 30 days of the tenancy ending, with an itemized, sworn list of any deductions backed by written estimates or receipts.
What if I'm buying a building with tenants already in it?
This is where buyers get hurt. When you buy, the existing deposits and last month's rent transfer to you, along with the responsibility for them. Make sure:
- The purchase and sale agreement requires the seller to transfer every deposit and last month's rent, with interest, at closing.
- You get copies of leases, receipts, account information and statements of condition.
- You notify tenants in writing that you now hold their deposits.
See buying a multifamily with tenants in place.
Questions people actually ask.
Do I have to collect a security deposit?
No. Some small landlords skip it and collect first and last month's rent instead, to avoid the compliance risk.
Can I keep the deposit for unpaid rent?
Unpaid rent and damage beyond normal wear and tear can be deducted, but only by following the legal process exactly.
What happens if I don't follow the rules?
A tenant may be entitled to the return of the deposit and, in some cases, up to three times the amount plus interest and legal fees.
This article is general information about Massachusetts real estate, not legal, tax, or financial advice. Every property and transaction is different. For advice on your situation, talk with me and, where appropriate, an attorney, lender, or tax professional.