In Connecticut, the collection and return of security deposits are primarily regulated under CT Gen. Stat. § 47a-21. These laws provide a set of rules that Connecticut landlords and property managers have to follow to protect all parties.
Maximum Security Deposit Charge in Connecticut
In Connecticut, the maximum amount landlords can charge as security deposit is two months’ rent. If the tenant is 62 years old or older, the limit is one month’s rent . If the tenant turns 62 after paying a security deposit that’s more than one month’s rent, the tenant has the right to a refund of the excess upon request.
Additional Pet Deposits: Under Connecticut’s law, the landlord may ask for an additional pet deposit; however, people with disabilities who use service animals are entitled to full and equal access to housing. Thus, the tenant may not be discriminated against and the landlord may not require the tenant to pay extra to have a service animal. If the service animal causes damage to the rental unit, the tenant is liable to pay for any damages.
The Federal Fair Housing Act requires housing facilities to allow tenants who use service dogs and emotional support animals to have an equal opportunity to use and enjoy their home.
Security Deposit Holdings in Connecticut
Landlords are required to promptly place the security deposit into one or more escrow accounts in a financial institution. The landlord is not allowed to withdraw funds from the escrow account except for the below situations:
- To return the security deposit or part of it to the tenant.
- Give the tenant interest that has accrued to the security deposit.
- Transfer the security deposit to the new owner of the property.
- To take interest that the tenant is not entitled to.
- Pay for costs chargeable to the security deposit.
- Transfer the security deposit into a different escrow account.
The landlord is required to give the tenant a written notice containing the details of the escrow account. This should include the name and address of the financial institution of where the security deposit is being held within 30 days of receiving the security deposit or if the landlord transfers the security deposit to another financial institution.
Any person who takes over the landlord’s interest in the rented property is required to give this notice within the same amount of time from the receipt of the security deposit.
If the rented property is sold during the lease, the landlord must withdraw the security deposit pertaining to the tenant of that property and deliver it to the buyer. The buyer must comply with the rules in holding security deposit in Connecticut as if it was the original landlord.
Failure to comply with the rules on placing the security deposit in an escrow account may mean a fine of up to $500 and/or imprisonment of not more than 30 days for each instance of noncompliance.
Allowable Deductions on Security Deposits in Connecticut
A Connecticut landlord may deduct from the security deposit cost of any damages or injury suffered by the landlord due to the tenant’s fault. These costs may include:
- Unpaid rent.
- Unpaid utility bills.
- Payment for property damage in excess of normal wear and tear (read more).
- The cost of damage caused by the tenant’s failure to comply with obligations as a tenant (read more).
To clarify, the landlord can’t always use the security deposit to cover repairs for damage caused by the tenant. Two things must be met before the landlord may do so:
- The damage must not be due to normal wear and tear (read more); and
- The cause of the damage must be the tenant’s failure to comply with obligations under the Connecticut Statutes (read more).
Can the deposit be used by the tenant as last month’s rent? Not usually, but it can be done if there is a written agreement between the parties to do so.
“Normal Wear and Tear” vs. Damage
- “Normal wear and tear” is deterioration that occurs from the intended use of the rental property and without negligence, carelessness, accident, misuse, or abuse of the premises or contents by the tenant, or invitees or guests of the tenant. It can include minor issues, such as gently worn carpets, loose door handles, fading wall paint and flooring, stained bath fixtures, lightly scratched glass and dirty grout that occur naturally as a result of the tenant using the property as it’s designed to be used.
- “Damage” refers to destruction to the rental unit that occurs because of abuse or negligence by a tenant during the course of the tenancy and can affect usefulness, value and normal function of the rental unit. Pet damage (heavily stained and ripped carpets), broken tiles, holes in the wall, broken windows and missing fixtures are all examples of damage.
Check out our article on “wear and tear” vs. “damage” to get a better idea of the difference.
The landlord can only charge the cost of repairs if the damage was caused by the failure of the tenant to comply with specific obligations. To comply with positive obligations, the tenant must:
- Comply with rules and regulations of applicable building, housing or fire codes on health and safety.
- Keep the premises, including all plumbing fixtures, clean and safe; Dispose of garbage and other waste in a clean and safe manner.
- Use all facilities and appliances (e.g., electrical, plumbing, heating, etc.) reasonably.
The tenant must not:
- Destroy, damage, or remove parts of the premises; or
- Unreasonably disturb the neighbor’s peaceful enjoyment of the premises.
If the damage to the premises was caused by the tenant’s failure to comply with any of the above, then the landlord may take the cost of repairing it from the security deposit.
Returning Security Deposits in Connecticut
Time Frame: The landlord has 30 days from the termination of the lease (after the tenant surrendered the rental property, returned the keys and has left the property).
Or 15 days after receiving written notification of the tenant’s forwarding address, whichever comes later, to return the security deposit, or what’s left of it after deductions, and the interest accrued.
Failure to Return Security Deposit on Time: If the landlord fails to return the security deposit and give an itemized list of deductions within the time allowed, the landlord may be liable for twice the amount of security deposit the tenant paid. The landlord may also face a fine of up to $250 for each offense of which the landlord is and was not allowed to withdraw funds.
Failure to Pay the Tenant Interest on Time: If the landlord is able to give the security deposit and itemized list of deductions, but fails to pay the tenant the interest that accrued to the latter, then the landlord will only be liable for $10 or twice the amount of interest the landlord failed to pay, whichever is greater.
Security Deposits and Tax Filing in Connecticut
How the security deposit will be treated tax-wise depends on whether or not the landlord gets to keep it (or part of it).
Taxable Income: Security deposits are not automatically considered income when the landlord receives them. The IRS advises to not include security deposits as income if the landlord may still be required to return the same. They only become taxable income when the landlord no longer has any obligation to refund them. For example, if the security deposit was given in 2020 but was only forfeited in 2021, then the landlord should only include it as income in 2021.
Reporting Security Deposit as Income: Whether or not security deposit should be reported as income and when to do so will depend on what it is being applied to or used as. Below are three simple rules the IRS has suggested:
- If the deposit is forfeited due to a breach of the lease or applied to unpaid rent, then the amount kept should be declared as income in the year it was forfeited or applied.
- If the security deposit is used to cover expenses that are chargeable to it, then the landlord should only include the part of the deposit used as income if the landlord includes the cost of repairs as expenses. If the landlord doesn’t include them as expenses as a matter of practice, then there’s no need to include the part of the deposit kept to cover them as income.
- There is an agreement between the parties to use the deposit or part of it as the final month’s rent, then the landlord should include it as income when the same is received.
Additional Rules & Regulations in Connecticut
Interest on Security Deposit: Connecticut landlords are required to pay interest on security deposits received or by the landlord’s option to credit the interest payment toward the rent. The interest rate on security deposits is determined by the Banking Commissioner every year. The interest rate on the security deposit must equal the average rate paid on the savings deposit by insured commercial banks as published by the Federal Reserve Board Bulletin and rounded to the nearest 0.1%.
For the year 2020, the interest rate is 15% . The tenant is not entitled to interest for the months wherein the tenant is late in paying the rent for more than 10 days or no later than 30 days after the termination of the tenancy. The landlord shall not increase the rent because of the interest of the security deposit.
Payment of Interest: The interest on the security deposit is payable on the anniversary date of the lease every year. The landlord can choose to pay the tenant the interest that the latter is entitled to or credit it to the next month’s rent. If the landlord knowingly fails to pay the tenant interest, the landlord shall be subject to a fine not more than $100 for each offense.
Providing a Forwarding Address: Upon the termination of the tenancy, the tenant may notify the landlord of a forwarding address , to where the landlord can mail or pay the security deposit, interest and written notice of deductions.
New Property Owner’s Responsibility: If the rental property is sold while the lease subsists, the buyer must refund the tenant’s security deposit when the lease ends. Therefore, the buyer should make sure to procure the security deposit and the proper accounting for the same from the previous owner.
For additional questions about security deposits in Connecticut, please refer to the official state legislation, Connecticut General Statutes § 47a-21 to § 47a-21 to 22a, for more information.
- 1 CT Gen Stat § 47a-21 (2018)
- 2 CT Gen Stat § 47a-21 (2018)
- 3 CT Gen Stat § 47a-21 (2018)
- 4 CT Gen Stat § 47a-21 (2018)
- 5 CT Gen Stat § 47a-21 (2018)
- 6 CT Gen Stat § 47a-21 (2018)
- 7 CT Gen Stat § 47a-21 (2018)
- 8 CT Gen Stat § 47a-21 (2018)
- 9 CT Gen Stat § 47a-21 (2018)
- 10 CT Gen Stat § 47a-21 (2018)
- 11 CT Gen Stat § 47a-21 (2018)
- 12 CT Gen Stat § 47a-11 (2018)
- 13 CT Gen Stat § 47a-21 (2018)
- 14 CT Gen Stat § 47a-21 (2018)
- 15 CT Gen Stat § 47a-21 (2018)
- 16 CT Gen Stat § 47a-21 (2018)
- 17 CT Gen Stat § 47a-21 (2018)
- 18 CT Gen Stat § 47a-21 (2018)
- 19 www.portal.ct.gov
- 20 CT Gen Stat § 47a-21 (2018)
- 21 CT Gen Stat § 47a-21 (2018)
- 22 CT Gen Stat § 47a-21 (2018)
- 23 CT Gen Stat § 47a-21 (2018)
- 24 CT Gen Stat § 47a-21 (2018)