The worst-case scenario when a tenant moves out is that you are left with property damage and unpaid charges. Collecting security deposits can offset these risks and keep you from using your cash flow on repairs.
In Boston, Massachusetts, there are security deposit laws you need to know before you can start collecting these funds. Keep reading to learn them to stay compliant as a landlord.
Maximum Deposit Amount
In Massachusetts, landlords cannot charge a security deposit that is more than the cost of one month's rent. This means that the security deposit maximum is entirely determined by the rent amount.
You don't have to charge the maximum, but it might be beneficial if a tenant damages your property or fails to pay rent.
You can charge an additional deposit for pets, but this law doesn't apply to disabled people. Under the Federal Fair Housing Act, you cannot discriminate against people with service or emotional support animals.
Rental Property Condition
One of the main landlord responsibilities when it comes to security deposits is to provide the tenant with a report on the condition of the unit. This property inspection must occur within 10 days of the lease start date.
The report should list building or sanitary code violations that have occurred before the tenant moves in. A lessee can check the condition and disagree with the statement by listing the points they have an issue with.
A rental management company can handle this process for you.
Security Deposit Deductions
Checking the property's condition protects landlord and tenant rights. As a landlord, you can use the initial condition report to check if the tenant damaged the unit during their lease.
If there are damages beyond wear and tear, you can use the security deposit to deduct the cost of those expenses. The security deposit can also cover unpaid rent and utilities.
You must provide the tenant with details about the deductions within 30 days of the end of the lease. This is also the amount of time you have to return the security deposit if no deductions were made.
Storing Security Deposits
Security deposits are refundable so they don't count as rental income. You cannot combine these funds with other business funds per Massachusetts law.
You can use one bank account to house all tenant security deposits as long as this is the only thing the account is used for.
Once you deposit the funds, you must provide the tenant with a receipt with the account number, bank name and address, and deposit amount.
Set up the account to be exempt from creditors as the funds might be transferrable at the end of a lease.
How Can Property Management Help?
There are a lot of federal and local laws regarding security deposits in Boston, MA. Luckily, you don't have to keep up with these regulations when you hire a full-service property management company.
PMI Bay State offers owners like you high-quality property management services. We use our local knowledge and state-of-the-art technology to protect your investment and exceed your goals.
For over 20 years, we've been offering property management services on the local level and are ready to help you. Contact us today to learn more about our offerings.
