Tenant screening is one of the best ways to mitigate your risk as a landlord, but it isn't foolproof. It's possible that bad residents still fall through the cracks. Landlords are then left with property damages and unpaid rent.
Luckily, you can use security deposits as a form of protection as a Columbia, MD, landlord. As long as you adhere to security deposit laws, you can deduct certain expenses to keep a consistent cash flow. Keep reading to learn more.
Security Deposit Maximum
Maryland landlords are limited to how much they can charge for a security deposit. You can charge no more than the equivalent of two months of rent.
If a tenant's rent amount is $1,500, the most you can charge as a security deposit is $3,000.
Landlords face repercussions if they charge more than the maximum lawfully allowed. You could be forced to pay the tenant up to three times the security deposit amount.
You can also charge for pet deposits, as long as the pet is not a service or emotional support animal. Discriminating against people with disabilities goes against the federal Fair Housing Act.
Security Deposit Storage
Open a separate bank account to store security deposits. The state of Maryland requires you to deposit security deposits in an account within 30 days of receiving it from a tenant.
For security deposits over $50, you must store the funds in an interest-bearing account that pays a 3% interest rate each year. You must provide a tenant with a receipt of the security deposit to avoid paying a fine.
Tenants can choose to purchase a surety bond as their security deposit. By law, you don't have to accept surety bonds, but it can improve the tenant-landlord relationship to be more accommodating.
Security Deposit Deductions
Security deposits can act as landlord tools if a tenant damages the property or fails to pay rent.
To adhere to tenant rights, be sure to only deduct what is legal from the security deposit. A property management team can help you stay compliant.
Common reasons for keeping part or all of the security deposit include:
- Unpaid rent
- Unpaid utilities
- Lost rental income
- Excessive cleaning costs
You cannot deduct money from the deposit for general wear and tear. To avoid disputes on deductions, be sure to add provisions regarding security deposits in your rental lease.
Security Deposit Returns
After a tenant moves out, you have 45 days to return part or all of the security deposit. You must return any interest accrued on the deposit as well. If you fail to return the deposit or interest, you forfeit your rights and may face penalties.
Send the deposit through first-class mail to the tenant's last known address. If you made deductions, provide an itemized list of the costs deducted.
A tenant who disagrees with your deductions may take you to court to receive their funds.
Handling Security Deposits Legally
Maryland has strict laws on handling security deposits that Columbia landlords must follow. To stay compliant and up to date with local regulations, hire an informed property manager.
PMI Real Asset MGMT is a full-service property management company providing investment tracking to landlords like you. For nearly 20 years, we have used our experience to help landlords with security deposits and rental leasing.
Contact us today to learn more about our services.
