So, you’ve closed on your first investment property! It’s likely an exciting yet nervous time as you search for your first tenants and enter the world of being a landlord. One common mistake that new landlords make involves proper handling of rental security deposits in MA. Here’s what you should know to avoid issues.
Amount of Security Deposits
Massachusetts law limits how much you can ask for a security deposit. It may not exceed one month’s rent. Additionally, you may not ask for a higher deposit for tenants with pets. If pets are a concern to you, it may be best to prohibit pets altogether.
Proper Handling of Rental Security Deposits in MA
Security deposits are technically the tenant’s money that you are simply holding. Therefore, you can’t go out and spend it! It cannot be mixed with your personal funds that may be subject to your creditors. Instead, you must place it into a separate escrow or similar account at a Massachusetts financial institution. Your tenant will need to fill out a special form with their social security number as their information also appears on the account. Lastly, the account should be interest-bearing.
Each year, the interest from a tenant’s security deposit must be given to them. You may either write out a check to them or deduct the amount from their rent. The tenant may also be responsible for filing that interest earned on their taxes.
Failure to Comply with the Law
Proper handling of rental security deposits in MA is extremely important. Failing to do so can subject you to a lawsuit, which may result in you paying triple damages to the tenant. Yes, that’s triple the amount of the security deposit! To protect yourself from such liability, pay close attention to the law and be sure to comply. If you have a potential case, either as a MA tenant or MA landlord, regarding security deposits, please contact Martino Law Group for a free consultation.