| Quick Facts | Answer |
| Maximum / Limit | 1 Months’ Rent (With Exceptions) |
| Receipt Requirement | Yes |
| Inventory Requirement | Yes (Upon Request) |
| Interest Requirement | Yes (With Exceptions) |
To learn about laws on security deposit returns in Maryland, click here.
Some cities and counties may have regulations which are more restrictive than those presented here. Always check local laws.
Maximum Security Deposit Allowed in Maryland
Maryland law limits the maximum security deposit to one months’ rent in most cases, beginning October 1, 2024. Until that date, the limit is two months’ rent. After that date, it can only be two months’ rent where there’s a written agreement with a tenant who is qualified for utility assistance and making utility payments directly to the landlord.
Landlords can give tenants the option to purchase a surety bond in lieu of (or in addition to) a security deposit as long as it is optional and the cost of the bond plus the security deposit does not exceed two months’ rent.
See MD Real Property Code Ann. § 8-203 for more rules regarding surety bonds.
Can Landlords Charge an Additional Pet Deposit in Maryland?
In Maryland, landlords can charge a pet deposit, except for service dogs and emotional support animals. However, the total security deposit cannot exceed two months’ rent. Landlords cannot exceed the limit by giving them another name like “pet deposit” or “damage deposit.”
How Much Rent Can a Landlord Collect Upfront in Maryland?
Landlords in Maryland can collect the first month’s rent in advance. However, landlords can only collect two additional months’ rent in advance, whether it is considered prepaid rent or a security deposit. Last month’s rent and any other prepaid rent is considered part of the security deposit.
If rent is collected in advance beyond the immediate rental period, it must be handled in the same way as a security deposit.
Security Deposit Collections in Maryland
When collecting a security deposit, landlords in Maryland must include a receipt in the lease agreement and deposit the security deposit into a qualifying account.
Do Landlords Have To Provide a Receipt for the Security Deposit in Maryland?
Yes, landlords in Maryland must provide a receipt for the security deposit in the lease agreement.
The receipt must notify the tenant of the following:
- The tenant has a right to attend an initial inspection by making a request in writing by certified mail no later than 15 days after they move in
- The tenant has a right to attend the final inspection by making a request in writing by certified mail at least 15 days before they move out
- The landlord must conduct the final inspection within 5 days of tenant’s move-out date (before or after)
- The landlord must notify the tenant in writing of the date of the inspection
- The tenant has a right to receive, by first-class mail, delivered to the last known address of the tenant, any remaining portion of the security deposit with a written list of deductions and actual costs, within 45 days after the termination of the tenancy
- If the landlord fails to comply with the security deposit law, it may result in the landlord being liable to the tenant for a penalty of up to three times the security deposit wrongfully withheld, plus reasonable attorneys’ fees
The landlord must keep a copy of the security deposit receipt for at least 2 years following the termination of the lease (whether by eviction, abandonment, or lawful termination).
The landlord is liable to pay up to $25 to the tenant for failure to provide the security deposit receipt.
What Obligations Do Landlords Have To Establish Property Conditions at Move-in in Maryland?
When collecting a security deposit in Maryland, landlords must notify tenants of their right to attend an inspection to establish the condition of the rental unit at the start of their tenancy.
Landlords must honor the tenant’s request for an initial inspection if one is requested in writing by certified mail no later than 15 days after the start of the lease term.
Security Deposit Holdings in Maryland
Landlords in Maryland must hold security deposits in one of three places: an interest-bearing account, a certificate of deposit, or in securities. The security deposit must be placed in an account within 30 days after the landlord receives it and it must not be commingled with other funds.
Option 1: Interest-bearing account. The landlord may place the security deposit in a federally-insured, interest-bearing account of a financial institution within the state.
Option 2: Certificate of deposit. The landlord may hold the security deposit in an insured certificate of deposit in a federally-insured financial institution within the state.
Option 3: Securities. The landlord may hold the security deposit in securities issued by the federal government or the State of Maryland.
The laws governing security deposits collected for mobile homes are different. For example, the security deposit collected for a mobile home must be held in a bank or savings account within the state. See MD Real Property Code Ann. § 8A-1001.
Are Tenants Entitled to Interest on Their Security Deposit in Maryland?
Landlords in Maryland do owe interest except on security deposits less than $50 or held for less than six months. The interest calculator provided by the Department of Housing and Community Development can be used to determine the minimum interest due.
The minimum interest is the daily U.S. Treasury yield curve for one year or 1.5% per year, whichever is greater. Interest accrues at monthly intervals but is not compounded.
Landlords do not owe interest on any partial month. For example, if a landlord returns a security deposit after eight months and three weeks, the landlord only owes interest on eight months.
How Are Security Deposits Accounted for in Maryland?
Security deposits are not considered taxable income when they are collected.
What Happens to a Security Deposit When the Property is Sold in Maryland?
When a property is sold in Maryland, the original landlord remains liable for the return of the security deposit until it is transferred to the new owner. The original landlord must also provide to the new owner:
- The amount and date of the deposit
- Records of the applicable interest rates
- Name and last known address of the tenant
Sources
- 1 Md. Code, Real. Prop. § 8-203(b)
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(1) Except as provided in paragraph (2) of this subsection, a landlord may not impose a security deposit in excess of the equivalent of 1 month’s rent per dwelling unit, regardless of the number of tenants.
(2) A landlord may impose a security deposit in an amount equivalent to up to 2 months’ rent if:
(i) The tenant is eligible and has qualified for utility assistance through the Department of Human Services;
(ii) The lease agreement requires that the tenant make payments for utility services directly to the landlord; and
(iii) The tenant and landlord agree in writing to the amount of the security deposit.
(3) If a landlord violates paragraph (1) of this subsection, the tenant may recover up to three times the extra amount charged, plus reasonable attorney’s fees.
(4) An action under this section may be brought at any time during the tenancy or within 2 years after its termination.
Source Link - 2 Md. Code, Real. Prop. § 8-203(i)(1) & (i)(2)
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(1) Under this subsection, a landlord:
(i) May not require the tenant to purchase a surety bond; and
(ii) Is not required to consent to the tenant’s purchase of a surety bond.
(2) (i) Instead of paying all or part of a security deposit to a landlord under this section, a tenant may purchase a surety bond to protect the landlord against:
1. Nonpayment of rent;
2. Damage due to breach of lease; or
3. Damage caused by the tenant or the tenant’s family, agents, employees, guests or invitees in excess of ordinary wear and tear to the leased premises, common areas, major appliances, or furnishings owned by the landlord.
(ii) A surety shall refund to a tenant any premium or other charge paid by the tenant in connection with a surety bond if, after the tenant purchases a surety bond, the landlord refuses to accept the surety bond or the tenant does not enter into a lease with the landlord.
Source Link - 3 Md. Code, Real. Prop. § 8-203(a)
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(a) (1) In this section the following words have the meanings indicated.
(2) “Landlord” means a landlord or a prospective landlord.
(3) “Security deposit” means any payment of money, including payment of the last month’s rent in advance of the time it is due, given to a landlord by a tenant in order to protect the landlord against nonpayment of rent, damage due to breach of lease, or damage to the leased premises, common areas, major appliances, and furnishings.
(4) “Tenant” means a tenant or a prospective tenant.
Source Link - 4 Md. Code, Real. Prop. § 8-203(c)
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(1) The landlord shall give the tenant a receipt for the security deposit as specified in § 8–203.1 of this subtitle
(2) The receipt shall be included in a written lease.
Source Link - 5 Md. Code, Real. Prop. § 8-203.1
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(a) A receipt for a security deposit shall notify the tenant of the following:
(1) The right to have the dwelling unit inspected by the landlord in the tenant’s presence for the purpose of making a written list of damages that exist at the commencement of the tenancy if the tenant so requests by certified mail within 15 days of the tenant’s occupancy;
(2) The right to be present when the landlord inspects the premises at the end of the tenancy in order to determine if any damage was done to the premises if the tenant notifies the landlord by certified mail at least 15 days prior to the date of the tenant’s intended move, of the tenant’s intention to move, the date of moving, and the tenant’s new address;
(3) The landlord’s obligation to conduct the inspection within 5 days before or after the tenant’s stated date of intended moving;
(4) The landlord’s obligation to notify the tenant in writing of the date of the inspection;
(5) The tenant’s right to receive, by first–class mail, delivered to the last known address of the tenant, a written list of the charges against the security deposit claimed by the landlord and the actual costs, within 45 days after the termination of the tenancy;
(6) The obligation of the landlord to return any unused portion of the security deposit, by first–class mail, addressed to the tenant’s last known address within 45 days after the termination of the tenancy; and
(7) A statement that failure of the landlord to comply with the security deposit law may result in the landlord being liable to the tenant for a penalty of up to 3 times the security deposit withheld, plus reasonable attorney’s fees.
(b) The landlord shall retain a copy of the receipt for a period of 2 years after the termination of the tenancy, abandonment of the premises, or eviction of the tenant, as the case may be.
(c) The landlord shall be liable to the tenant in the sum of $25 if the landlord fails to provide a written receipt for the security deposit.
Source Link - 6 Md. Code, Real. Prop. § 8-203(d)
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(1) (i) The landlord shall maintain all security deposits in federally insured financial institutions, as defined in § 1–101 of the Financial Institutions Article, which do business in the State.
(ii) Security deposit accounts shall be maintained in branches of the financial institutions which are located within the State and the accounts shall be devoted exclusively to security deposits and bear interest.
(iii) A security deposit shall be deposited in an account within 30 days after the landlord receives it.
(iv) The aggregate amount of the accounts shall be sufficient in amount to equal all security deposits for which the landlord is liable.
(2) (i) In lieu of the accounts described in paragraph (1) of this subsection, the landlord may hold the security deposits in insured certificates of deposit at branches of federally insured financial institutions, as defined in § 1–101 of the Financial Institutions Article, located in the State or in securities issued by the federal government or the State of Maryland.
(ii) In the aggregate certificates of deposit or securities shall be sufficient in amount to equal all security deposits for which the landlord is liable.
(3) (i) In the event of sale or transfer of the landlord’s interest in the leased premises, including receivership or bankruptcy, the landlord or the landlord’s estate, but not the managing agent or court appointed receiver, shall remain liable to the tenant and the transferee for maintenance of the security deposit as required by law, and the withholding and return of the security deposit plus interest as required by law, as to all or any portion of the security deposit that the landlord fails to deliver to the transferee together with an accounting showing the amount and date of the original deposit, the records of the interest rates applicable to the security deposit, if any, and the name and last known address of the tenant from whom, or on whose behalf, the deposit was received.
(ii) A security deposit under this section may not be attached by creditors of the landlord or of the tenant.
(4) Any successor in interest is liable to the tenant for failure to return the security deposit, together with interest, as provided in this section.
Source Link - 7 Md. Code, Real. Prop. § 8-203(e)
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(1) Within 45 days after the end of the tenancy, the landlord shall return the security deposit to the tenant together with simple interest which has accrued at the daily U.S. Treasury yield curve rate for 1 year, as of the first business day of each year, or 1.5% a year, whichever is greater, less any damages rightfully withheld.
(2) (i) Except as provided in subparagraph (ii) of this paragraph, interest shall accrue at monthly intervals from the day the tenant gives the landlord the security deposit. Interest is not compounded.
(ii) No interest is due or payable:
1. Unless the landlord has held the security deposit for at least 6 months; or
2. For any period less than a full month.
(3) Interest shall be payable only on security deposits of $50 or more.
(4) If the landlord, without a reasonable basis, fails to return any part of the security deposit, plus accrued interest, within 45 days after the termination of the tenancy, the tenant has an action of up to threefold of the withheld amount, plus reasonable attorney’s fees.
Source Link - 8 Md. Code, Real. Prop. § 8-203(n)
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A landlord is entitled to rely on the list of yield curve rates or the customized calculator maintained by the Department of Housing and Community Development under subsection (m) of this section when calculating the interest on a security deposit.
Source Link
