Rent escrow laws are extremely important for landlords to understand. Massachusetts laws are very specific about the handling of escrowed funds and the penalties for failing to do so. Some of these laws may be changing based on bills currently up for review during the 2019-2020 legislative session. Here’s a look at proposed Massachusetts legislative bills related to rent escrows.
Establishing Rent Escrows
Tenants may withhold payment of rent to landlords in certain cases, such as when landlords fail to make necessary repairs or address building code violations or an eviction proceeding is taking place. There are two bills that would require tenants to pay their rents to the courts during such disputes. Bill H.1191, Bill H.1347 , and S.1023 propose that tenants pay their normal rent, on-schedule, to the court during the dispute period. Once the court makes a decision, those funds can then be disbursed accordingly. This prevents tenants from using such disputes as a means to avoid paying rent altogether and landlords from having to chase tenants for back-rent awarded to them by the court.
Change in Security Deposit and Escrow Laws
Another of the Massachusetts legislative bills relating to rent escrows involves security deposits and last month’s rent. If passed, Bill H.1457 contains very impactful provisions. First, it removes the triple damages penalty on landlords for failure to properly deposit and pay interest from escrowed funds. Tenants would be able to sue only for actual damages. Secondly, it outlines circumstances where landlords would forfeit their right to the security deposit and their right to counter-claim against tenants’ efforts to reclaim deposits. These circumstances include:
- Failure to properly deposit funds or use an improper type of account.
- Failure to provide a list of itemized damages within 30 days.
- Failure to pay the remainder of security deposit funds within 30 days (after deducting damages).
- Including language in lease terms that do not comply with escrow law.
- Not paying interest on escrowed funds as mandated by the law.
The key takeaway from this is that if landlords mishandle security deposit funds and/or do not follow the strict rule of the law, they would not be able to retain any part of the security deposit, even for legitimate damages. Also, tenants would not be awarded anything more than actual damages.
More on Massachusetts Legislative Bills Relating to Rent Escrows
In a state where rental laws heavily favor tenants, the above bills will promote landlord rights. There is no telling whether these bills will actually progress through the committees or receive approval. Stay tuned for future updates and news on these and other Massachusetts legislative bills that affect landlords and tenants.