In Montana, the collection and return of security deposits are primarily regulated under the MT Code § 70-25-201 These laws provide a set of rules that Montana landlords and property managers have to follow to protect all parties.
Maximum Security Deposit Charge in Montana
In Montana, there are no limits on how much a landlord may charge as a security deposit as long as it is stated in the lease agreement. Landlords generally charge between one and two months’ rent as a security deposit.
Additional Pet Deposits: Under Montana’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.
Inspection Walk-Through Requirements in Montana
Montana requires that landlords conduct a move-in inspection of the property when collecting a security deposit. This written statement of inspection aims to provide an accurate report of the condition the unit is in prior to tenancy, which can be used to make deductions at the end of the lease before returning security deposit funds. If no condition statement is provided, the landlord may forfeit the right to deduct certain damages from the balance.
The checklist of conditions should include a list of damage and cleaning costs associated with the furnishings within the rental property as well as a statement that includes:
- A clear and concise statement of the present condition of the premises known to the landlord or the landlord’s agent or which should have been known upon reasonable inspection.
- If the premises have never previously been let, a statement indicating the fact.
- The signature of the landlord or the landlord’s agent.
The tenant or landlord may also request a supervised move-out inspection within seven days prior to the termination of tenancy which can be used to determine the amount to be withheld from the deposit in damages.
Allowable Deductions on Security Deposits in Montana
Montana provides specific instances where deductions can be made against the security deposit, which include:
- Unpaid rent, late charges, unpaid utility charges and cleaning fees (plus landlord’s labor)
- 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;
- Penalties due under the lease agreement.
Can the deposit be used by the tenant as last month’s rent? The deposit may not be used as the last month’s rent in Montana.
“Normal Wear and Tear” vs. Damage in Montana
- “Normal Wear and Tear” is defined as deterioration that occurs as a result of use for which the rental unit is intended and without negligence, carelessness, accident, or misuse or abuse of the premises or contents by the tenant or members of his household, or their invitees or guests. 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” in Montana means “any and all tangible loss, injury, or deterioration of a leasehold premises caused by the willful or accidental acts of the tenant occupying the leasehold premises or by the tenant’s family, licensees, or invitees, as well as any and all tangible loss, injury, or deterioration resulting from the tenant’s omissions or failure to perform any duty imposed upon the tenant by law with respect to the leasehold.”
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 under the said rule, the tenant must:
- Comply with all obligations primarily imposed upon tenants by applicable provisions of building and housing codes materially affecting 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 (e.g., electrical, plumbing, heating, etc.) and appliances reasonably.
- Use the parts of the premises, including the living room, bedroom, kitchen, bathroom, and dining room, in a reasonable manner, considering the purposes for which they were designed and intended.
- Maintain smoke detection and/or carbon monoxide detection devices.
- Comply with the maximum number of persons allowed to occupy the premises.
- Leave the premises in the same condition it was in when it was handed to the tenant.
A tenant may not:
- Change the locks on doors on the premises, except if necessary in an emergency.
- Negligently and deliberately destroy, deface, damage, impair, or remove any part of the premises or permit any person to do so.
- Unreasonably disturb the neighbor’s peaceful enjoyment of the premises, this includes the tenant’s invited guests.
- Engage in illegal activities, including drug manufacturing, enabling gang-related activities, unlawfully possess firearms, explosives, or other dangerous substances.
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. The landlord may adopt rules about the tenant’s use of the property, this shall only be enforced if the rule is in writing and delivered to the tenant. These rules that the landlord has adopted must be:
- In “promotion of convenience”
- For the safety or welfare of the tenant.
- Preserving the property from abuse.
- Create fairness for all tenants to access facilities and services.
If the rule is adopted after the tenant enters a rental agreement and the new rule is considered a major change to the rental agreement, the newly adopted rule is will not be enact for week-to-week rentals until seven days after the landlord give the tenant written notice and 30 days after written notice if the rental is month-to-month.
Returning Security Deposits in Montana
Time Frame: A Montana landlord has 10 days to return a security deposit if there are no outstanding balances or rent owed. If rent is owed, the timeline becomes 30 days for the landlord to return any unused portion of the security deposit along with an itemized list of damages deducted.
This time frame begin on the date of termination presented in the lease agreement and written notice should be mailed to the tenant’s forwarding address or last-known address.
Wrongful Withholding of Security Deposit: The landlord who withholds the security deposit, or a portion of the security deposit is liable in damages to the tenant in a civil action for an amount equal to the sum determined to have been wrongfully withheld or deducted.
The tenant must first follow these instructions before proceeding with the courts:
- The tenant’s receipt from the landlord of a written denial of the sum alleged to be wrongfully detained.
- The time frame has reached the end of a 30-day period after the termination of a tenancy.
- The time frame has reached the end of a 30-day period after surrender and acceptance of the leasehold premises.
- The expiration of a 10-day period after the landlord has indicated there were no damages to the premises, no cleaning was required, no rent was unpaid, and no utilities were left unpaid by the tenant.
Attorneys’ fees may be awarded the prevailing party by the court.
Failure to Return Security Deposit as Required: If the landlord refuses or fails to return the security deposit and a written list of damages and cleaning charges within the 10- or 30-day limit, the tenant stands to recover damages equal to the withheld sum, plus any legal fees associated with recovering the deposit in court.
Security Deposits and Tax Filing in Montana
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:
- 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 Montana
Receipt Requirements: The landlord is not required to provide a receipt for the security deposit in Montana.
Security Deposit Holdings in Montana: Montana laws do not require landlords to hold security deposits separate from other funds.
Security Deposit Interest in Montana: Montana laws do not require landlords to provide interest on held security deposits.
Cleaning Fees in Montana: Montana allows cleaning fees to be charged to tenants only after written notice has been given to the tenant that specifies the conditions that need to be remedied. From this notice, the tenant has 24 hours to complete the cleaning and return the premises to the correct condition.
New Property Owner’s Responsibility: If the original landlord decides to sell or transfer ownership of the rental property, he or she is required to assume responsibility for the security deposit funds and their return.
For additional questions about security deposits in Montana, please refer to the official state legislation, Montana Landlord-Tenant Statutes.