Maryland Security Deposit law

Security Deposit Basics

First-time landlords know that security deposits can help pay for damage to property and be used to cover a tenant’s non-payment of rent. What landlords may not realize, however, is that Maryland’s security deposit laws are a bit more complex than those in many other states, and handling security deposits incorrectly could result in financial penalties.

Deposit Amounts and Interest

Maryland law allows landlords to charge a security deposit not in excess of two months’ rent. Tenants who are overcharged for a security deposit have the right to recover up to three times the extra amount charged, along with reasonable attorney fees. Upon receipt of a security deposit, a landlord has 30 days to deposit the money in an Maryland interest-bearing account. Interest accruing after January 1, 2015 must accrue at 1.5% per year or the simple interest rate accrued at the daily U.S. Treasury yield curve rate for one year, as of the first business day of each year, whichever is greater, unless the lease has a higher amount. For Interest accrued prior to January 1, 2015, the interest rate is 3 percent per year, or 4 percent per year for deposits held before Oct. 1, 2004. Interest begins accruing on the date the tenant gives a deposit to the landlord, not the date it’s deposited into an account. The Maryland Department of Housing and Community Development offers an online calculator to help landlords determine the correct security deposit refund.

Damage v. Normal Wear and Tear

Any occupied property will show signs of normal wear and tear after some time. A carpet that shows some soiling in a high-traffic area is therefore not considered to be property damage, but a large burn mark or excessive stains could be. Landlords may not withhold any portion of a damage deposit to remedy normal wear and tear. Landlords must return the deposit or if there is damage or rent owed, provide the tenant with a written list of those damages and their actual repair costs, within 45 days of the tenant’s moving out. If the landlord fails to provide the 45-day letter to the tenant or return the security deposit, the landlord may be liable for treble damages and attorneys fees. Tenants also have a right to be present for the final inspection of the premises, so long as they provide landlords with a 15-day notice of their move-out date and a new address. That notice must be provided via certified mail, and the landlord must respond via certified mail, informing the tenant of the inspection time and date.

Unpaid Rent and Broken Leases in Maryland

While landlords may apply security deposit funds to cover unpaid rent or losses due to early lease termination or eviction, they may not be entitled to keep the entire deposit. If a tenant breaks a lease, a landlord may be able to keep an amount that covers actual losses, and landlords are expected to make a reasonable effort to re-let the property. If a new tenant offsets the cost of a broken lease or eviction, the landlord may have to return a portion of the deposit. For example: A tenant breaks a lease by moving out two months early; his monthly rent was $600, so he had paid a security deposit of $1,200; a new tenant moves in one month later, so the landlord’s actual losses are only $600 – for the one month the property wasn’t occupied. The landlord is entitled to keep only $600 of the previous tenant’s security deposit.

Security Deposit Law in Maryland

Maryland’s security deposit laws can easily be misinterpreted, and that’s how some new landlords inadvertently end up owing hefty fees to former tenants. Lusk Law, LLC specializes in assisting landlords, helping to avoid litigation when possible and ready to actively represent our clients in court when litigation is necessary. Our experienced attorneys have provided legal counsel and representation to landlords and tenants in Frederick County, Howard County, Baltimore County, Baltimore City, Carroll County, Washington County, and Anne Arundel County, as well as other counties in Maryland. With over a decade of experience in representing landlords, we’re ready to offer a consultation concerning your rights. Please call us at 443-535-9715 or fill out our contact form if you have any questions about this topic.