Key Aspects of Security Deposits in Massachusetts

Purpose of Security Deposits:
The primary purpose of a security deposit is to protect the landlord from financial losses resulting from tenant negligence, damage to the rental unit, or unpaid rent. If a tenant damages the property, the landlord may use part or all of the security deposit to repair the damage. Similarly, if the tenant fails to pay rent or breaks the lease, the deposit may be used to cover these costs.

Limit on Amount of Security Deposit:
Massachusetts law places strict limits on the amount a landlord can collect as a security deposit. A landlord cannot charge more than one month’s rent as a security deposit for residential rental agreements. This limit helps to ensure that tenants are not burdened with excessive upfront costs when moving into a rental property.

Conditions for Collecting a Security Deposit:
The collection of a security deposit is typically agreed upon in the lease agreement. It must be clearly stated in writing and included as part of the lease terms. The landlord is required to provide the tenant with a receipt that outlines the amount of the security deposit and the conditions under which it will be returned.

Deposit Handling and Interest Requirements:
Massachusetts law requires landlords to place the security deposit in a separate, interest-bearing account. The landlord must provide the tenant with the account details, including the bank’s name and the account number. Additionally, the landlord must pay the tenant interest on the deposit each year, which must be at least 5% of the deposit or the rate the bank offers, whichever is lower. The interest is typically paid to the tenant at the end of the lease term or annually.