I covered this topic in Part 4 of my blog series. However, this topic warrants its own discussion. When can a landlord withhold a security deposit? How much can the landlord withhold? Can a landlord seek damages from the tenant if the costs to repair a tenant’s damage to the rental property exceed the amount of security deposit?
Section 8-203 of the Real Property article of the Maryland Annotated Code statutorily prescribes how security deposits are to be returned to tenants. Remember that pre-tenancy walkthrough and inspection you hopefully did? At the end of the lease, the tenant has the right to be present for a walkthrough and inspection as well. When the tenant notifies the landlord by certified mail that the tenant intends to move out and provides the landlord of the date of moving and tenant’s new address, the tenant will have the right to be present when the landlord inspects the premises to determine if any damage (beyond normal wear and tear) to the premises was done. Section 8-203 requires the tenant to mail a notice requesting to be present at the time of inspection at least 15 days prior to moving out. It also requires a landlord, upon receipt of the tenant’s notice, to notify the tenant by certified mail of the time and date of inspection, which must be within 5 days before or 5 days after the tenant’s move. Practical Tip: If you had a pre-tenancy walkthrough and indicated damage to the premises on a checklist, that same checklist should also be used for the post-tenancy walkthrough to properly note any changes in the leased premises.
If any damages are found during the post-tenancy walkthrough, the security deposit, or any portion thereof, may be withheld for damage due to breach of lease or for damage by the tenant or the tenant’s family, agents, employees, guests or invitees in excess of ordinary wear and tear to the leased premises, common areas, major appliances, and furnishings owned by the landlord. The security deposit also may be withheld for unpaid rent.
This, however, is where it gets tricky, Landlord. Within 45 days after the end of tenancy, you MUST return to tenant the security deposit minus any amount which you may rightfully withhold. Simple interest of 3% per year must be paid on security deposits of $50 or more and must accrue at 6 month intervals from the day the security deposit was given. Interest is not compounded. If a landlord without good reason, fails to return any part of the security deposit within 45 days after the end of the tenancy, the landlord is liable to the tenant for up to three times the withheld amount of the security deposit plus reasonable attorney’s fees.
Be careful, Landlord. Section 8-203 could not be more clear. If you are withholding any or all of the security deposit, you must provide the tenant with a statement of the costs actually incurred by you to fix the damages. Put it this way: if, hypothetically, a tenant damages the leased premises’ hardwood floor, a landlord simply cannot obtain an estimate for repairs, deduct those charges from the security deposit, and then claim the security deposit for payment of those charges without first having actually spent money to perform the necessary repairs. That is, a landlord cannot assess damage charges to the tenant and keep the tenant’s security deposit without having actually incurred costs to make those repairs. This doesn’t mean, Landlord, that you can’t make the repairs yourself (However, you might want to be careful at how you are itemizing labor costs, especially if you are not a licensed contractor). This provision in Maryland law ensures that landlords properly use security deposits. Practical Tip: When a landlord withholds a security deposit, or a portion thereof, and sends the tenant an itemized list of costs actually incurred, the landlord should also include copies of receipts (both for labor and supplies) and/or paid invoices showing that repairs were actually made.
Again, improperly withholding a security deposit could subject a landlord to liability for three times the amount of the original security deposit.
Maryland law also sets forth how security deposits are to be returned in the event a tenant is evicted, ejected for breach of lease, or abandons the leased premises. These provisions turn on whether the tenant has given proper and timely notice of his or her new address and requests return of the security deposit. The obligations of the landord, however, essentially are the same as those stated herein. Security deposits are to bear interest, are to be returned timely, and any portion withheld should be accompanied by a statement of costs actually incurred.
If your tenant has caused damage beyond the amount of the security deposit, a landlord can bring a civil action against the tenant for breach of contract. In a civil action, the normal rules of civil procedure and evidence will normally apply (except in small claims actions).