Tag Archives: Security Deposits

How to Setup a Security Deposit Account

20 Nov

By Attorney George Warshaw
MetroBoston Publication Date: November 20, 2013

 

There’s more to it than you may think.

First, the account has to be set up within 30 days of when the security deposit is paid, and the tenant given notice of the account within that 30 days period.

Second, it must be placed in a bank located in Massachusetts. You can’t use Fidelity to hold the money and you can’t deposit it in another state.

So you can’t set it up at Bank of America in New Hampshire or Citizens in Rhode Island. The account branch has to be located in Massachusetts.

Most banks have what they call security deposit accounts; basically a savings or escrow account that pays interest. Usually the name of the account identifies it by the words “Tenant’s Security Deposit Account” or some variation.

I use TD Bank. TD has a special Security Deposit Account Agreement that complies with the law. Five other banks I surveyed don’t use any special agreement. Therefore, I can’t tell if the account just sounds nice or actually complies with the legal requirements.

Last, landlords have to give tenants notice about the account every year. Make it easy on yourself. Have the printed monthly bank statement sent directly to the tenant. They get the info required and you can always access it online.

 

© 2013 George Warshaw.  George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, litigates real estate matters, and prepares wills, trusts, and estate plans. George welcomes new clients and questions. Contact him at metro@warshawlaw.com.

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Lessons Landlords Haven’t Learned

7 Nov

MetroBoston Publication Date November 6, 2013
By Attorney George Warshaw

I’ve written many articles on security deposits intending to educate landlords and tenants alike. I’ve met with many tenants on their security deposit problems and received a great many more emails from tenants.

Oddly, I’ve never received one email from a landlord. Perhaps they don’t read the Metro.

These are the most common violations of the security deposit laws.

#1. Not returning the deposit within 30 days after the tenancy ends.

#2. Deducting for repairs that are not “repairs” such as apartment cleaning, repainting where the alleged abuse is only ordinary wear and tear, and repairs that are not actually made.

#3. Not stating in the landlord’s deduction letter above the signature (or elsewhere): “signed under the penalties of perjury.” A landlord cannot deduct for repairs unless these magic words appear.

#4. Not depositing the security deposit into a proper tenant’s security deposit account.

#5. Not paying the tenant interest every year.

#6. Not delivering the tenant a notice within 30 days of occupancy stating the bank and account numbers where the money is being held.

#7. Not providing the tenant an Apartment Condition Statement within 10 days of occupancy.

Numbers 1, 2, 3, and 4 are triple damage penalties under the law.
Numbers 6 and 7 result in the loss of the right to take or hold the security deposit.

© 2013 George Warshaw. George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, litigates real estate matters, and prepares wills, trusts, and estate plans. George welcomes new clients and questions.  Contact him at metro@warshawlaw.com.

Is Interest Due on Last Month’s Rent?

9 Oct

MetroBoston Publication date October 9, 2013
By Attorney George Warshaw 

Many landlords choose to require a last month’s rent rather than a security deposit under the belief that there is less risk and no liability with a last month’s rent.

That’s very true with one exception: a landlord still has to pay the tenant interest on the amount of the last month’s rent.

Yes, that’s right. It’s a common misconception that interest is only payable on a security deposit and not on the last month’s rent.

The tenancy statute is very clear. A tenant is entitled to interest at the annual rate of 5% on the amount paid as last month’s rent with one exception.

A landlord may avoid paying the 5% rate if the landlord escrows the money in an interest-bearing account bank account. In that case the tenant only receives the interest earned in the account.

In calculating the number of months that interest is due, the landlord doesn’t have to pay interest for the very last month of the tenancy, since that is the month for which the last month’s was taken and presumably used.

If a landlord takes a last month’s rent and a security deposit, the tenant is entitled to interest on both, payable at the end of each year of the tenancy.

© 2013 George Warshaw.  George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, litigates real estate matters, and prepares wills, trusts, and estate plans. George welcomes new clients and questions. Contact him at metro@warshawlaw.com.

 

How to Get Your Security Deposit Back

9 Oct

Metro®Boston, Publication Date: October 09, 2012
Expanded content

By Attorney George Warshaw

Has it been more than 30 days since your tenancy ended?

If, like the vast majority of rentals, your tenancy ends on August 31st, then, under state law your landlord has until October 1st to return your security deposit.

While the law on security deposits is tricky, and you must consult a lawyer for your specific situation, here are some of the basics:

If a landlord, without right, fails to return a security deposit within 30 days after your tenancy ends (presuming you left on time), the landlord is typically liable for 3 times the amount that was not returned.

If a landlord attempts to deduct for damage to the apartment you must be sent a letter by October 1st (the 30 days period) listing the damage to the apartment and the repair costs together with any receipts.

The letter – and this is the key – must be signed by the landlord under the “penalties of perjury.” If the letter does not contain those magic words above the landlord’s signature, the landlord cannot deduct for damage to the apartment.

Can the landlord charge a move out fee or the cost to clean the apartment? You may be surprised by the answer.

WHAT CAN BE LEGALLY DEDUCTED?

The security deposit law, chapter 186, section 15B, is very clear. A landlord can deduct for unpaid rent, water (but only if it is separately metered and you legally agreed to pay it), increases in real estate taxes (but only if you agreed to pay any increase that occurs during your tenancy) and damage to the apartment for which you are responsible – that’s it!

Just because an apartment is damaged in the landlord’s view, it does not mean that the repair cost can be deducted from the tenant’s security deposit. The tenant has to be legally responsible for the damage.

WHAT CANNOT BE LEGALLY DEDUCTED?

The tenant is not responsible for reasonable wear and tear that occurs during the use of the apartment or conditions that existed at the initial rental of the premises.

Cleaning costs are not a repair and a landlord may not deduct the cost to clean an apartment from a security deposit.

Move-out fees cannot be deducted. Some condominium buildings charge the owner of a condo a move-in fee and a move-out fee. Landlords, quite naturally, try to pass that cost along to their tenants. Under the security deposit statute, a landlord can’t charge a move-in fee at the inception of the tenancy, and can’t deduct a move-out fee from the tenant’s security deposit.

WHAT TO DO IF YOU HAVE NOT RECEIVED YOUR DEPOSIT WITHIN 30 DAYS

It is a good idea before or shortly after moving to give your landlord a forwarding address where to return your security deposit. That will eliminate the excuse of “I didn’t know where to send it.”

If you have not received your security back within the 30-day period, you have several choices. You can certainly write to your landlord and request that it be sent immediately. That’s a nice and courteous thing to do. Courts appreciate it.

The law, however, does not require that you send your landlord a letter or wait more than 30 days from the end of your tenancy to take action.

  • You can file a small claims lawsuit and seek triple damages.
  • You can hire a lawyer to file a lawsuit on your behalf.

Many law firms, like ours, do not charge a tenant a fee for pursuing a security deposit claim. The law requires a landlord pay the tenant’s legal fees in a successful security deposit claim. A court then decides what a fair and proper fee is.

GETTING HELP OR ADVICE.

If you need answers to your security deposit questions or help in getting your security deposit back, email me at george.warshaw@warshawlaw.com. We routinely represent tenants with security deposit problems and answer questions without charge. ©2012 George Warshaw.

George Warshaw is a Massachusetts attorney and the author of a legal text, Massachusetts Landlord-Tenant Law, Lexis Law Publishing, now in its second edition.

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Legal Advice: Laws, and court decisions interpreting them, change frequently. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship. Before making any legal decision, consult an attorney to see how the foregoing may apply to your particular circumstances.

How Much May a Landlord Charge at Rental?

4 May

Metro® Boston, Publication Date: May 4, 2011

By Attorney George Warshaw

The law is clear: a landlord in Massachusetts cannot require a residential tenant pay more than a first month’s rent, a last month’s rent, a security deposit (of no more than one month’s rent), and a key and lock deposit when renting an apartment.

That’s the maximum. There are no exceptions.

A pet deposit, a cleaning deposit, or any other kind of “deposit” is nothing more than a security deposit. There’s nothing inherently wrong with a landlord limiting the potential use of a security deposit to repair a specific type of damage to an apartment, such as one caused by a pet. The problem usually arises when the deposit doesn’t relate to the “condition of the apartment” or the total of these security deposits exceeds a single month’s rent.

A landlord who requires a full month’s security deposit and a half month’s pet deposit, for example, asks for too much. A tenant has the right to demand that the landlord immediately return the excess.

Demanding more than what the law permits is considered an unfair or deceptive act or practice under the Massachusetts Consumer Protection Act and subjects a landlord to possible significant damages under multiple landlord-tenant and consumer protection laws.

The foregoing is not intended as legal advice. Consult an attorney to see how or if the foregoing applies to you.

Attorney George Warshaw represents buyers and sellers of homes, condos and investment properties, prepares wills and trusts for inheriting real estate, and trusts that protect your children and pets. George welcomes new clients and questions at  george.warshaw@warshawlaw.com.

What You Need to Know before Renting an Apartment

1 May

Rental Basics – a two-part series
Metro® Boston, Publication Date: April 20, 2011
Metro® Boston, Publication Date: April 27, 2011

By Attorney  George Warshaw

I’m often asked by landlords, “what should I do before renting an apartment?” My initial advice is “fix up the apartment before you rent it, eliminate every possible code violation and document it.”

Massachusetts gives a tenant the right to withhold rent if there are sanitary or building code violations in the apartment that endanger the health or safety of its occupants. If these conditions exist and certain requirements are met, the tenant is entitled to a reduction in the rent and a defense in any legal action to evict the tenant.

Under current law, a landlord is responsible for defective conditions that exist at the inception of the tenancy, even if the landlord doesn’t know about the problems. If, for example, an apartment has drafty and loose windows or rodents at the time of the rental, the landlord is liable under the law even if the tenant doesn’t complain about it.

So, be a smart landlord; inspect your apartments and eliminate any problems before your tenants move in.

On Security Deposits and Last Month’s Rent

A security deposit is treated differently under Massachusetts law than a last month’s rent. Rent is the landlord’s money and can be spent by the landlord at any time. A security deposit is the tenant’s money and must be protected and preserved. A security deposit must be held in a special security deposit bank account in Massachusetts. The tenant is entitled to interest on both the last month’s rent and security, even though the landlord may freely spend the last month’s rent.

Landlords routinely make 2 major mistakes in handling security deposits.

If a landlord fails to give a tenant an “Apartment Condition Statement” requesting the tenant list any defects in the apartment, the landlord cannot later deduct for damage to the apartment from the security.

If a landlord fails to provide the tenant with the required bank and account information within 30 days of taking the deposit, the landlord forfeits the right to hold the deposit and has to return the deposit on the tenant’s request. © 2011 George Warshaw.

The foregoing is not intended as legal advice. Consult an attorney to see how or if the foregoing applies to you.

Attorney George Warshaw represents buyers and sellers of homes, condos and investment properties, prepares wills and trusts for inheriting real estate, and trusts that protect your children and pets. George welcomes new clients and questions at  george.warshaw@warshawlaw.com.