- Maryland caps security deposits at one month’s rent, with limited exceptions, and total deposits (including pet deposits) generally cannot exceed two months’ rent.
- Landlords must follow strict handling and documentation rules, including providing a proper receipt, storing deposits in approved accounts, and paying required interest.
- Only lawful deductions are allowed, such as unpaid rent, lease breaches, and excessive property damage beyond normal wear and tear.
- Security deposits must be returned within 45 days of move-out, and failure to comply with Maryland law may result in penalties of up to three times the wrongfully withheld amount, plus legal fees.
Under Title 8 of the Maryland Real Property Code, property owners can require security deposits from first-time residents. You can then use the security deposit towards unpaid rent, unpaid utilities, or excessive damage, after the resident moves out.
The right to require security deposits from residents does, however, come with certain responsibilities. For example, the maximum amount you can ask a resident in Maryland is one month’s rent.
Other than the security deposit limit, other landlord-tenant laws you must abide by include:
- Proper storage.
- Lawful deductions for damages in excess of ordinary wear and tear after the resident moves out.
- Adherence to the return deadline.
Please note that certain penalties may apply for violating any of these rules. As such, you must ensure strict adherence to all dictates of the Maryland security deposit law. Keep on reading this blog by UTZ Property Management to learn more about the Maryland security deposit law.
A Guide to the Maryland Security Deposit Law
Just like other laws under the Maryland landlord-tenant law, abiding by the state’s security deposit law isn’t optional. It’s a requirement for successful property ownership. If a landlord fails to do so, whether intentionally or otherwise, they may risk potential legal action that may result in stiff civil penalties for violations.
Some cities and counties may also have extra regulations that are more restrictive than the ones in this guide. Make sure you do due diligence in this regard as well.
Maximum Security Deposit Law
As already mentioned, Maryland generally limits the maximum security deposit amount to one month’s rent. There is an exception if you have a written agreement with a resident who is qualified for utility assistance and making utility payments directly to you. You may also give residents the option of buying a surety bond instead of a security deposit.
Additional Security Deposits
Just like in most states, landlords in Maryland can charge residents with pets an extra deposit. The amount, plus the security deposit, must, however, not exceed two months’ rent.
When charging additional pet deposits, you must exempt service dogs and emotional support animals. This is because these aren’t considered pets under the Federal Fair Housing Act. Rather, they are working animals with specialized training to help disabled residents live independently.
Security Deposit Receipt
In Maryland, landlords who require security deposits from residents must provide a receipt in the written lease agreement. The receipt must notify the resident of some details, including:
- Their right to attend the move-in inspection if they request in writing within fifteen days after moving in.
- Their right to attend the final inspection if they request in writing fifteen days before moving out.
- The date of the inspections.
- Their right to receive a refund of the security deposit within 45 days after moving out, less any allowable deductions.
That failure of the landlord to keep the security deposit law may result in penalties of up to 3X the wrongfully withheld security deposit amount, plus reasonable court, plus reasonable attorney's fees.
Security Deposit Holdings
After receiving a tenant’s security deposit, you must hold it in one of three ways per Maryland law. You have up to thirty days to do so after receiving it.
- Place the amount in an account that yields interest. The account must also be federally insured.
- Hold it in a federally insured financial institution in an insured certificate.
- Hold the security deposit amount in securities issued either by the state of Maryland or the federal government.
If you hold the resident’s security deposit in an interest-bearing account, then you must keep the following in mind.
- You must pay interest on any amount exceeding $50 and held for more than 6 months.
- The account must yield interest at the rate of 1.5% or the daily U.S. Treasury yield curve for one year, whichever is greater.
Sale of Rental Property
If the ownership of a leased premises changes hands, the old landlord must transfer the security deposit to the new owner. The old landlord must also provide the new landlord with a written statement notifying them of some details, including the security deposit amount, date received, interest rate records, and the resident’s name and address.
Acceptable Deductions in Maryland
In Maryland, landlords can make deductions from a resident’s security deposit for certain things. Including:
- Unpaid rent.
- Lost rent payments due to a breach of the terms of the lease agreement.
- Costs of fixing property damage that goes beyond ordinary wear and tear.
Security Deposit Returns
In Maryland, landlords must return residents’ security deposits within 45 days after they move out. You must include any accrued interest as well.
Please note that residents have a right to attend the final inspection if they request it. The resident must request in writing by certified mail at least fifteen days before the move-out date.
Bottom Line
All this information should be at your fingertips when requiring security deposits in Maryland. Otherwise, you may risk potential penalties for violations. As you probably know, ignorance of the law isn’t a legal defense.
UTZ Property Management can provide you with quality rental management services in Frederick, MD, and the surrounding counties. Get in touch to learn more!
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.
