Maine Security Deposit Law

Last Updated: September 22, 2021 by Elizabeth Souza

QUICK FACTS
  • Standard Limit / Maximum Amount: A maximum of two months’ rent and three months’ rent for mobile home parks (read more)
  • Security Deposit Exemption: Rental structures with or five fewer rental units are not subject to security deposit law if the landlord inhabits one of the units (read more)
  • Surety Bond as Security Deposit: Landlords can offer a surety bond of no more than two months’ rent instead of collecting a traditional security deposit (read more)
  • Security Deposit Holding Requirements: Landlords must provide a receipt that provides the location of the held deposit if asked by the tenant, and may not commingle funds (read more)
  • What Can Be Deducted: Unpaid rent, cost of damage to the unit (not wear and tear), breach of lease, utility charges owed to the landlord directly, and any other reason mentioned in the lease agreement (read more)
  • Time Limit for Return: Within 30 days of moving out or turning the keys over or if it is a tenancy-at-will, within 21 days after the termination of the tenancy. (read more)
  • Penalty if Not Returned on Time: Forfeiture of right to retain any portion of the deposit, plus twice the deposit in damages and legal fees if the withholding is willful and negligent (read more)

Purpose. Maine defines “security deposit” as any advance or deposit with the primary function of securing that a tenant adheres to the lease or tenancy agreement. Security deposits act as additional protection from damages for landlords and act as a deterrent for tenants to misuse the property or beak the lease during their tenancy.

Questions? To chat with a Maine landlord tenant attorney, Click here

Legal Basics. Maine landlords can charge up to two months’ rent as a security deposit through surety bond or standard money holding. It must be returned at the end of tenancy if no deductions are to be made, or within 30 days if deductions are planned. Tenant has the right to demand a return of the security deposit within seven days of the request under threat of legal action, which will be considered wrongful retaining if the notice is not obliged and may be subject to double the security deposit in damages. Security deposit law does not apply to rental buildings with five or fewer units.

Maximum Security Deposit Charge in Maine

In Maine, landlords may charge up to two months’ rent. A mobile home park may require charge up to three months’ rent.

Additional Pet Deposits. Pet deposits are not controlled but usually equate to one month’s rent. Under Maine’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 Exemption in Maine. Security deposit laws – including limits, deduction requirements, and returns – don’t apply to landlord occupied buildings with five or fewer units.

Surety Bond As Security Deposit in Maine

Instead of collecting a traditional security deposit, landlords may offer the tenant the choice to purchase a surety bond for a portion or entirety of the security deposit. The landlord shall never require the tenant to purchase a surety bond. If the tenant chooses to purchase a surety bond and provide a security deposit, the amount of both the surety bond and security deposit shall not exceed two months’ rent, otherwise the landlord forfeits the right to retain any funds at the end of tenancy.

Notice of Rights of a Surety Bond: The landlord must provide the tenant with a copy of any signed agreements or documents once the surety bond is purchased. When purchasing a surety bond, the tenant’s rights and responsibilities include the following:

  1. The surety bond is nonrefundable, nor considered as insurance for the tenant.
  2. The surety bond is purchased to protect the landlord against unpaid rent, unpaid utility charges that the tenant was required to pay directly to the landlord, any breach of the rental agreement, the cost of storing and disposing of unclaimed property and any negligent damages caused by the tenant.
  3. The tenant shall reimburse the surety for amounts the surety paid to the landlord.
  4. The tenant has the right to pay the damages directly to the landlord or require the landlord to use the tenant’s security deposit, if any, before the landlord makes a claim against the surety bond.

Security Deposit Holding Requirements in Maine

Maine landlords are under certain obligations when holding a landlord’s security deposit.

Receipt Requirements: The landlord is not required to provide a receipt for the security deposit in Maine unless the tenant requests a receipt.

Security Deposit Holdings in Maine: The security deposit shall be held in a bank or another financial institution. The security deposit shall not be commingled with any other funds. The tenant may request the financial institution name and account number from the landlord. For multiple tenants residing in separate buildings and owned by different entities are substantially controlled or owned by a single landlord, a landlord may use a single escrow account to hold the tenant’s security deposits.

Security Deposit Interest in Maine: Maine laws do not require landlords to provide interest on held security deposits.

Allowable Deductions on Security Deposits in Maine

The landlord may use the security deposit to make deductions only after the tenant has vacated the premises. The security deposit should be used to cover, but are not limited to the following:

  1. Unpaid rent;
  2. Costs of damage caused by the tenant’s failure to comply with obligations as a tenant but not those considered to be standard wear and tear;
  3. Utility charges owed directly to the landlord; and
  4. Cost of storing and/or disposing of unclaimed property.

Can the deposit be used by the tenant as last month’s rent?
The deposit may be used as the last month’s rent only if both parties agree in the lease agreement. Otherwise, the security deposit should be handled separately from any rent balance left outstanding.

“Normal Wear and Tear” vs. Damage in Maine

  • Normal Wear and Tear refers to the deterioration that occurs, based upon the use for which the rental unit is intended, without negligence, carelessness, accident or abuse of the premises or equipment or chattels by the tenant or members of the tenant’s household or their invitees or guests. The term “normal wear and tear” does not include sums or labor expended by the landlord in removing from the rental unit articles abandoned by the tenant such as trash. If a rental unit was leased to the tenant in a habitable condition or if it was put in a habitable condition by the landlord during the term of the tenancy, normal wear and tear does not include sums required to be expended by the landlord to return the rental unit to a habitable condition, which may include costs for cleaning, unless expenditure of these sums was necessitated by actions of the landlord, events beyond the control of the tenant or actions of someone other than the tenant or members of the tenant’s household or their invitees or guests.
  • “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, normal function of the rental unit. Pet damage (heavily stained and ripped carpet), broken tiles, hole 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.

Tenant’s Obligations

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 establish these rules, the landlord must provide them in the lease agreement. To oblige these conditions, the tenant should:

  1. Keep the premises, including all plumbing fixtures, clean and safe;
  2. Dispose of garbage and other waste in a clean and safe manner;
  3. Use all facilities (e.g. electrical, plumbing, heating, etc.) and appliances reasonably;
  4. Maintain smoke detection and/or carbon monoxide detection devices;
  5. Comply with the maximum number of persons allowed to occupy the premises; and
  6. Leave the premises in the same condition it was in when it was handed to the tenant.

The tenant may not:

  1. Change the locks on doors on the premises, except if necessary in an emergency;
  2. Destroy, damage, or remove parts of the premises;
  3. Unreasonably disturb the neighbor’s peaceful enjoyment of the premises; and
  4. Engage in illegal activities involving prostitution, gambling, use of alcohol or controlled or prohibited substances, and other similar or illegal activities, or in activities promoting the same within 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 Maine

Time Frame: A Maine landlord must return the remaining deposit balance, along with an itemized receipt of deductions (if applicable), within 30 days. This period begins on the date of termination presented in the lease agreement. If the agreement is considered a tenancy-at-will or the tenant ends the tenancy at a mobile home park, then the security deposit must be returned within 21 days after the termination or the surrender of the premises.

The landlord must provide a written statement of a detailed itemized list of reasons the landlord will keep any portion of the security deposit. This must be mailed along with the returned funds to the tenant’s last known address.  If the landlord does not provide the written statement of deductions, the landlord forfeits the right to retain any portion of the security deposit.

Failure to Return Security Deposit as Required: If the landlord refuses or fails to return the security deposit within the 30-day limit, the tenant has the right to give notice of legal action against the landlord to recover the deposit. This should be done seven days before legal action is to be taken, during which the landlord must respond to the notice and return funds or be considered wrongfully retaining.

If it is determined that the landlord wrongfully withheld, the tenant stands to recover up to double the security deposit, plus any legal fees associated with recovering the deposit in court.

Questions? To chat with a Maine landlord tenant attorney, Click here

Security Deposits and Tax Filing in Maine

Whether a security deposit will be treated as taxable or not depends on if the deposit is used or returned.

Taxable Income: Security deposits are not automatically considered income upon collection at the beginning of tenancy. They only become taxable income when the landlord no longer has any obligation to refund them (such as for settling damages incurred). At this point they may also qualify as a write-off for tax purposes as well.

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 to follow:

  1. 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.
  2. 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.
  3. If 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 Maine

Penalty for Violation of Security Deposit Law: If a landlord is found to violate any section of the security deposit laws in Maine, the tenant is entitled to recover the greater of actual damages, $500, or the equivalent of a month’s rent along with reasonable expenses and legal fees incurred due to the violation.

New Property Owner’s Responsibility: A rental unit can change ownership through sale, assignment, death or appointment. The person who holds the security deposit while the tenancy period still exists is required upon the transfer of ownership of the rental unit to do the following:

  1. Provide to the new owner with an accounting of the amount of each security deposit paid by each tenant and held by the person holding the security deposits;
  2. Transfer the security deposit or any remainder after deductions for damages to the new owner;
  3. Mail the tenant a notice of that transfer, a notice of the transferee’s name and address, and a copy of the accounting of the amount of the security deposit transferred; and
  4. Return the security deposit or any remainder after deductions are made.

If the landlord’s ownership in the rental property is terminated by sale, the accounting and transfer of the security deposits must occur at the real estate closing.

For additional questions about security deposits in Maine, please refer to the official state legislation, Maine Landlord-Tenant Statutes