Md. law specific on security deposits

Mailbag

October 25, 1998

Dear Mr. Azrael:

You stated [in a previous column] that the security deposit [for an apartment] must be kept in a separate bank account for the tenant and returned within 30 days with a 4 percent interest per year.

Are you quoting Maryland law?

Most banks, including mine (Columbia Bank), consider an account dormant if no new transactions occur during the year, and only have an interest rate of 2.47 percent, yielding 2.50 percent.

Do you suggest the security deposit be placed into a 12-month certificate of deposit? This would be the only investment that would yield 4 percent. On whose tax return would this certificate of deposit be reported on?

My tenant is moving from my condo [this month], after a five-year stay. If the rental is in A-1 shape, how much interest do I owe him on his deposit of $650?

Angela Walterhoefer

Ellicott City

Dear Ms. Walterhoefer:

I have received quite a few questions lately about security deposits. Here is a summary of Maryland law, which applies to every lease for an apartment or single-family home.

The owner must deliver to the tenant a receipt for a security deposit. The receipt (which can be part of a written lease) must state:

* The amount of the security deposit. The amount cannot exceed the equivalent of two months' rent or $50, whichever is greater, per dwelling unit covered by the lease.

* The owner must place the security deposit in a Maryland banking or savings institution within 30 days of receipt in an interest-bearing account devoted exclusively to security deposits. The funds cannot be commingled with the owner's other funds.

* Within 45 days after the end of the tenancy, the owner must return the security deposit to the tenant with simple interest at the rate of 4 percent per year. Interest accrues only on a security deposit of $50 or more, and is credited at six-month intervals from the day the tenant gives the owner the security deposit.

* The owner can withhold from the deposit and interest the amount of any unpaid rent or other damages, including the tenant's failure to leave the premises free of debris and furniture, failure to return all keys to the premises, or for damage to the premises caused by tenant, his family or guests in excess of normal wear and tear.

* If the owner is withholding money from the security deposit, the owner, within 30 days after the termination of the tenancy, must send the tenant a written list of damages claimed, together with a statement of costs actually incurred. The list must be sent by first-class mail directed to tenant's last known address.

Landlords often protect themselves by sending this notice by certified mail, return receipt requested. In case the letter is returned "unclaimed" or nondeliverable, the landlord keeps the sealed letter as proof it was sent.

If the tenant has been evicted by court order, or has abandoned the premises before the lease is up, the landlord is not required to send a notice unless the tenant demands return of the deposit by sending the owner a first-class letter within 45 days of being evicted or abandoning the premises. The owner then has 30 days to mail the tenant a list of damages.

* The tenant has a right to be present when the premises are inspected by the owner. The tenant must notify the owner in writing at least 15 days prior to the date of moving. Upon receipt of such notice, the owner must notify the tenant by certified mail of the date and time when the premises will be inspected. The inspection date shall occur within five days before or five days after the date of moving as designated in the notice from tenant to owner.

All these procedures are complicated for the "casual" landlord. But failure to comply can be costly to the property owner. The law allows a tenant to recover up to three times the withheld amount, plus court costs and attorney's fees, if the landlord fails to return a security deposit as required. If the landlord fails to send the tenant a list of damages within 30 days, any right to retain the security deposit is forfeited.

Pub Date: 10/25/98

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