Don’t Do It – The Case Against Taking a Security Deposit in Massachusetts

By Robert Nislick

You are a Massachusetts landlord. A new tenant is about to lease your house or apartment from you. You would like to take a security deposit from this person.

In the event that the tenant damages the property or fails to pay rent, the idea of having a security deposit available to cover these costs may seem like a good idea. Most landlords probably don’t appreciate the irony that taking a security deposit, in reality, subjects them to a great deal of risk.

If you knew that you could make an honest mistake and still end up having to pay the tenant three times the security deposit, five percent interest, court costs, and the tenant’s attorney’s fees, would you still take one?

Let’s say you took a $2,000.00 security deposit. For whatever reason, you failed to place these funds in a separate bank account. Alternatively, you failed to return the security deposit to the tenant within thirty days after the end of the tenancy.

Under these scenarios, the security deposit law states that, “the tenant shall be awarded damages in an amount equal to three times the amount of such security deposit or balance thereof to which the tenant is entitled plus interest at the rate of five per cent from the date when such payment became due, together with court costs and reasonable attorney’s fees.” See G. L. c. 186, § 15B (7).

The landlord could easily have to pay the tenant more than $7,000.00. Additionally, once a judgment enters, it grows at 12% per year.

Let’s say the tenant sues the landlord to recover her security deposit. Suppose the tenant has damaged the premises. The statute sets forth five separate situations in which the landlord would be barred from filing a counterclaim for damage to the premises. See G. L. c. 186, § 15B (6). The landlord, however, would not be entirely without a remedy. He would have to file a separate civil suit against the tenant to recover for property damage. Nevertheless, the statute forces the landlord to take a more convoluted procedural route than a defendant, in most other kinds of cases, normally has to take.

Suppose the tenant files a small claim against the landlord to recover a security deposit and wins. The landlord wishes to appeal. Under G. L. c. 218, § 23, the landlord would have to provide a bond in an amount roughly equal to the amount of the judgment that entered against him, in order to appeal and have a new trial.

Let’s back up for a moment. Imagine that a tenant who just moved out has wrecked the place. The landlord wants to deduct from the security deposit to repair damage caused by the tenant beyond reasonable wear and tear. Even if the landlord follows the statute to the letter in making the deduction, the tenant may still disagree and choose to file suit. A landlord could easily find himself forced to expend time and resources defending against what appears to be a frivolous or meritless lawsuit.

Under all the circumstances, why would a landlord still want to take a security deposit? It is true that not every landlord gets burned. But if the decision to take a security deposit carries with it a substantial risk of suffering an expensive and unjust outcome, then wouldn’t the landlord simply be better off not taking one to begin with?

About the author: Robert Nislick is a Massachusetts real estate lawyer who handles residential and commercial landlord-tenant matters. For more information, call him at (508) 405-1238, or e-mail him at rob@nislick.com.