Maryland Security Deposit Collections and Holdings

Maryland Security Deposit Collections and Holdings

Last Updated: May 24, 2024 by Roberto Valenzuela

Quick Facts Answer
Maximum / Limit 1 Months’ Rent
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.

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 the Condition 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.

note

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

Security Deposit Collections in Other States