Massachusetts Security Deposit Collections & Holdings

Massachusetts Security Deposit Collections & Holdings

Last Updated: January 13, 2023 by Ashley Porter

Quick Facts Answer
Maximum / Limit 1st Month’s Rent
Receipt Requirement Required
Inventory Requirement Required
Interest Requirement Only After 1st Year

To learn about laws on security deposit returns in Massachusetts, click here.

Maximum Security Deposit Allowed in Massachusetts

Massachusetts law limits the maximum security deposit to the first month’s rent.

Can Landlords Charge an Additional Pet Deposit in Massachusetts?

Yes, in Massachusetts, landlords can charge a pet deposit, except for service dogs and emotional support animals. However, the total security deposit cannot exceed the first month’s rent. Landlords cannot exceed the limit by giving them another name like “pet deposit” or “damage deposit”.

This law does not prevent landlords from adding a monthly pet premium. See Flemming v. Greystar Mgmt. Servs.

How Much Rent Can a Landlord Collect Upfront in Massachusetts?

In addition to the maximum security deposit, landlords in Massachusetts can collect no more than first and last months’ rent upfront.

If last month’s rent is collected in advance, it must be equal to the first month and the landlord must provide a receipt that includes:

  • The amount of the payment and date it was received
  • The purpose of the payment
  • The name of the person receiving the payment
  • A description of the rental property
  • Whether the tenant is entitled to interest and the amount of interest (if the prepaid rent is placed in an interest-bearing account)
  • Instructions to the tenant to provide a forwarding address at the end of the tenancy

Unlike a security deposit (which must be held in an interest-bearing account), landlords can choose where to hold last month’s rent because it is their money, not the tenant’s. However, if landlords choose to place the money in an interest-bearing account, the interest belongs to the tenant. See Gallo v. Marinelli.

If a landlord chooses to place the prepaid rent in an interest-bearing account, it accrues from the first day of the tenancy to the day before the last month. The required rate of interest is the actual interest paid by the bank or 5%, whichever is lower.

If the prepaid rent gains interest, the landlord must pay or credit the tenant the interest on an annual basis as well as within 30 days after the lease ends. At every anniversary of the lease, the landlord must either pay the interest to the tenant directly or send written notice to the tenant that they may deduct the amount from rent.

Security Deposit Collections in Massachusetts

When collecting a security deposit, landlords in Massachusetts must:

  • Provide the tenant with a receipt
  • Send written notice to the tenant documenting the condition of the rental unit
  • Maintain a detailed record of security deposits collected

The detailed record of security deposits must include:

  • A detailed description of damage to rental units for which the landlord accepted or returned a security deposit or sued a tenant
  • Lease termination dates of any tenants who were charged for damage
  • Details, dates, costs, and receipts for any repairs done relating to security deposits
  • Written statements of damages completed when collecting security deposits

The detailed records must be kept for at least two years after each lease termination and must be available for any past, existing or prospective tenant to review during normal business hours.

Do Landlords Have to Provide a Receipt for the Security Deposit in Massachusetts?

Yes, landlords in Massachusetts must provide a receipt for the security deposit including:

  • The amount of the security deposit
  • The date it was received
  • The name and signature of the person receiving it
  • A description of the rental property

What Obligations Do Landlords Have to Establish the Condition at Move-in in Massachusetts?

Landlords in Massachusetts must provide a written statement  describing the condition of the rental unit at the start of the lease term within ten days after the start of the tenancy.

The written statement must be signed by the landlord or their agent and include:

  • A detailed summary of all existing damage to the rental unit
  • Any existing sanitary or building safety code violations
  • The following word-for-word statement in 12-point, bold-face font at the top of the first page:

”This is a statement of the condition of the premises you have leased or rented. You should read it carefully in order to see if it is correct. If it is correct you must sign it. This will show that you agree that the list is correct and complete. If it is not correct, you must attach a separate signed list of any damage which you believe exists in the premises. This statement must be returned to the lessor or his agent within fifteen days after you receive this list or within fifteen days after you move in, whichever is later. If you do not return this list, within the specified time period, a court may later view your failure to return the list as your agreement that the list is complete and correct in any suit which you may bring to recover the security deposit.”

The tenant must sign and return the statement (or a corrected statement if they disagree) to the landlord within 15 days after receipt of the statement or occupancy of the rental unit, whichever is later. If the landlord receives a corrected statement, they have 15 days to provide their response to the tenant.

Security Deposit Holdings in Massachusetts

Landlords in Massachusetts must hold security deposits in an interest-bearing bank account located within the state. The security deposits must not be commingled with the landlord’s own funds and must be held in a way that protects the funds from the landlord’s creditors.

Within 30 days after receipt of the security deposit, the landlord must provide the tenant with a receipt that includes the:

  • Name and location of the bank
  • Account number
  • Amount of the deposit

If the landlord fails to comply with these holding requirements, the tenant is entitled to the immediate return of the security deposit.

Are Tenants Entitled to Interest on Their Security Deposit in Massachusetts?

Landlords in Massachusetts do owe interest on security deposits, but only if they’re held for one year or longer. The rate of interest must be 5% or the actual rate of interest paid by the bank, whichever is lower.

Interest accrues from the first day of the lease term. Once a tenant is entitled to interest on their security deposit, it must be either credited towards rent or paid to the tenant directly once per year. Each year, at the anniversary of the lease, the landlord must send a written statement to the tenant including:

  • Name and location of the bank
  • Account number
  • Amount of interest due
  • Payment of the interest or a statement that the tenant can deduct the amount from rent

If the tenant has not received the written statement by 30 days past its due date, they have the right to deduct the interest from rent.

How Are Security Deposits Accounted for in Massachusetts?

Security deposits are not considered taxable income when they are collected.

What Happens to a Security Deposit When the Property is Sold in Massachusetts?

When a property is sold in Massachusetts, the landlord must transfer the security deposit along with interest to the new owner, who must handle it according to the same rules. The new landlord or their agent must notify the tenant in writing within 45 days of the receipt of the security deposit.

The written notice must state that they received the security deposit and must include the name, business address, and telephone number of the landlord and/or their agent.

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