As a landlord, you have a right to collect a security deposit under Maryland Code Annotated § 8-203 and § 8-203.1. Be that as it may, you must abide by the Maryland landlord-tenant laws in doing so.
Here is everything you need to know regarding the Maryland security deposit laws.
How Much Can a Landlord Collect as a Security Deposit in Maryland?
As a landlord, there is a limit to how much you can collect as a security deposit in Maryland from your tenants. Under the Maryland security deposit law, you must not collect any amount beyond the equivalent of two months’ rent as a security deposit.
If the monthly rent is, say, $1,200, then you can ask for a maximum of $2,400. If you exceed this limit, you may be liable to hefty penalties. Including, having to pay the tenant up to 3X the excess amount, plus reasonable court and attorney fees.
Do Landlords Have to Store the Tenant’s Security Deposit in Any Particular Way?
Yes, there are rules on how Maryland landlords must store the security deposit. You have three options: either store the security deposit in an interest-bearing account, hold it in an insured certificate of deposit, or purchase a surety bond.
If storing it in an interest-bearing account, you must follow the following rules under the security deposit law:
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You must store the tenant’s deposit in a separate account, which is specifically meant for deposits. You must do this within 30 days of receiving it.
You must store the deposit ($50 or more) in an interest-bearing account. The account must accrue interest at a rate of at least 3% annually. You won’t, however, have to pay the tenant any interest if the deposit is below $50 or held for less than six months.
You may also hold it in an insured certificate of deposit at a financial or banking institution. The other option of storing the tenant’s deposit is by posting it as a surety bond.
Do Maryland Landlords Have to Notify Their Tenants After Receipt of the Security Deposit?
Yes, this is a requirement under Maryland security deposit law. You must provide your tenants with a receipt after receiving their security deposit. You can include it as a lease term, but must notify the tenant of the following.
The tenant has a right to request the landlord to inspect the premises within 15 days of moving in. In the checklist, you must take note of any existing damage.
The tenant has a right to be present during the walk-through inspection. The tenant will need to provide the landlord with a written notice at least 15 days before the D-day.
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The landlord is responsible for keeping a record of the security deposit receipt for at least two years after the tenant leaves.
The landlord is liable for paying the tenant $25 if they fail to provide the tenant with a security deposit receipt.
What Deductions Can a Landlord Make to the Security Deposit?
As a Maryland landlord, you may keep a portion, or all of the tenant’s deposit, for certain allowable reasons. They include the following.
To cover unpaid rent or late fees from the tenant.
To cover monetary damages resulting from lease violations, such as early lease termination without legal justification by the tenant.
To cover the cost of fixing damage exceeding normal wear and tear caused by the tenant.
There is no legal limit to how much deductions you can make for such violations. The only requirement is that the deductions must be reasonable. You can even seek alternative solutions if the security deposit fails to cover all the damages such as unpaid rent and physical damages.
What Is the Difference Between Normal Wear and Tear and Damage?
Sometimes there is a thin line between these two types of damages. And confusing one for the other can lead to potential conflicts and misunderstandings, which can even lead to lawsuits.
“Normal wear and tear” is the deterioration that occurs when a tenant uses their rented premises for its intended purpose. Some examples of ordinary wear and tear include stained bathroom fixtures, lightly dirtied grout, gently worn carpets, and loose door handles.
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“Damage” is the destruction that exceeds normal or ordinary wear and tear. It occurs out of a tenant’s abuse or negligence. Common examples include missing fixtures, holes in the wall, and broken tiles or windows.
Do Maryland Landlords Need to Do a Walk-Through Inspection?
Yes! You must perform a walk-through inspection at least 5 days before or after the tenant vacates the unit. As a landlord, you must notify the tenant of their right to be present during the walk-through inspection.
This notice must be in writing, and must state the date of the walk-through inspection.
When Must Landlords Return Their Tenants’ Security Deposit?
You have up to 45 days after the tenant vacates the property, whether through move-out or eviction, to return their security deposit, or whatever portion remains. This portion must also include any accrued interest on the security deposit.
You must send it to the tenant’s last known forwarding address via first-class mail. If not returning the whole deposit, you must send the portion alongside an itemized list of deductions.
Wrongful withholding the tenant’s security deposit can have severe repercussions on your bottom line. You may have to pay them up to 3X the wrongfully withheld amount, plus reasonable court and attorney fees.
What Happens to the Security Deposit if the Landlord Sells the Property?
You may need to sell your investment property for a smorgasbord of reasons. From job relocation, to investment diversification, to market conditions, and everything in between.
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Whatever may be the reason, though, you must comply with Maryland security deposit laws. In case of a change in property ownership, you’ll need to do the following things.
Transfer the deposit, minus allowable deductions, to the new owner.
Provide the new owner with the tenant’s name, address, contact info, and the security deposit amount.
Conclusion
To keep yourself and your property legally compliant, you’ll need to firmly grasp the state’s landlord-tenant laws like the Fair Housing Act. But should you need expert help, The Maryland and Delaware Group PM can step in. We provide property owners with full-service property management services. Get in touch today to get started!
Disclaimer: Please note that the information provided in this blog is intended for general guidance and should not be considered as a replacement for professional legal advice. It is important to be aware that laws pertaining to property management may change, rendering this information outdated by the time you read it.
