Security Deposits

• Definition

• Maximum amount

• Receipt

• List of existing damages

• Bank account

• Return of deposit to tenant; interest

• Withholding of deposit

• Notice to tenant

• Tenant ejected or evicted or abandoning

• Waiver of section’s provisions

Security deposits began to earn interest on March 5, 1973. From March 5, 1973 to July 1, 1980, the rate was 3% per year. On July 2, 1980, the rate was increased to 4%.  Recently the rate was changed back to 3% per year on March 26th, 2005.

This law applies to all residential tenancies, whether the lease is written or oral.

Definition
A "security deposit" is any payment of money, including the final month's rent paid in advance, which is given to the landlord by the tenant in order to protect the landlord against non-payment of rent or damage to the leased premises, common areas, major appliances, and furnishings. 

Maximum amount
The maximum amount which the landlord may require as a security deposit for each dwelling unit is the equivalent of two month's rent. This is regardless of the number of tenants in the unit. If the landlord charges more than this, the tenant may recover up to three times the excess amount plus reasonable attorney's fees. The tenant's action to recover this amount may be brought at any time during the tenancy or within two years after termination.

Receipt
The landlord must give to tenant a written receipt for the security deposit as specified in section 8-203.1 and is liable to the tenant for $25 if he fails to do so. The receipt may be included in the written lease.

List of existing damages
Either the lease or the receipt must contain language informing the tenant of his right to receive from the landlord a written list of all existing damage to the leased premises if the tenant so requests in writing within the first 15 days of his occupancy.

If requested, the landlord must provide the list of damages. If he does not, he is liable to the tenant for three times the amount of the security deposit. This liability of the landlord may be reduced by any damages or unpaid rent which he is entitled to under this section.

Bank account
The landlord shall maintain all security deposits in federally insured financial institutions, as defined in section 1-101 of the Maryland Financial Institutions Article, which do business in the state. The landlord must deposit the amount of each security deposit in that account within 30 days after receiving it. The security deposit account cannot be attached by the landlord’s creditors. In the event of sales or transfer of any sort, including receivership or bankruptcy, the security deposit is binding on the successor in interest to the person to whom the deposit is given.

Return of deposit to tenant; interest
The landlord must, within 45 days after the end of tenancy, return to tenant the security deposit minus any amount which he may rightfully withhold. Simple interest of 3% per year must be paid on security deposits of $50 or more and must accrue at 6 month intervals from the day the security deposit was given. Interest is not compounded. If the landlord, without good reason, fails to return any part of the security deposit within 45 days after the end of the tenancy, he is liable to the tenant for up to three times the withheld amount of the security deposit plus reasonable attorney's fees.

Withholding of deposit
The security deposit, or any portion thereof, may be withheld for unpaid rent, damage due to breach of lease or for damage by the tenant or the tenant's family, agents, employees, guest or invitees in excess of ordinary wear and tear to the leased premises, common areas, major appliances, and furnishings owned by the landlord.

If the tenant notifies the landlord by certified mail that he intends to move out, the date of moving and his new address, he will have the right to be present when the landlord inspects the premises to determine if any damage was done. The notice must be mailed at least 15 days prior to date of moving. Landlord must then notify tenant by certified mail of the time and date of inspection, which must be within 5 days before or 5 days after tenant's move.

If the landlord fails to notify tenant in writing at the time of payment of the security deposit, of his rights under this subsection relating to the inspection, then the landlord forfeits the right to withhold any part of the Security deposit for damages, including unpaid rent.

If the landlord attempts to use the deposit to compensate for breach of the leased agreement, he can only claim the actual amount of money lost due to the tenant's breach. If the landlord re-rents the property before the end of the tenant's term, his actual damages are reduced by the amount he gains from the new agreement.

Notice to Tenant
If the landlord withholds any part of the security deposit, he must send to the tenant by first class mail to his last known address, a written list of the damages he claims, together with a statement of costs actually incurred. If the landlord fails to do this within 45 days after termination, he loses the right to use the deposit to offset damages, including unpaid rent.

Tenant ejected or evicted or abandoning
Where tenant has been evicted or ejected for breach of the lease, or has abandoned the premises prior to termination of the lease, the procedure for return of the security deposit is as follows: 1) Within 45 days after leaving the premises, tenant sends to landlord by first class mail a request for return of the security deposit, and informs landlord of tenant's new address;

2) Within 45 days of receipt of the notice, landlord sends to tenant, by first class mail, a list of damages deducted from the security deposit and a statement of costs actually incurred.  Within 45 days of receipt of tenant’s notice, landlord sends to tenant the security deposit with simple interest of 3% per year minus damages properly withheld; and 3) If landlord fails to send the list of damages, he forfeits the right to withhold any part of the security deposit for damages. If he fails to return the security deposit as required, tenant may sue for up to three times the withheld amount, plus reasonable attorney's fees.

Waiver of section's provisions
The provisions of this law cannot be waived in any lease.