maryland security deposit law

A security deposit is meant to insure a landlord against a myriad of liabilities. These include the nonpayment of rent, negligent property damage and other breaches of the Maryland lease agreement. 

In Maryland, just like in other states, you have a right to collect a security deposit from your tenants. In doing so, however, there are rules you must follow. For example, complying with the set limit, storing it appropriately, and returning it as per the set time.

In this blog, we’ll provide you answers to some of the commonly asked questions regarding security deposits in Maryland. 

#1: Maryland security deposit limit

There is a limit to how much security deposit you can charge your tenants. The state of Maryland requires landlords to charge the equivalent of 2 months’ rent. So, supposing you charge your tenants $1,500 as rent, then the most you can charge them as a security deposit is $3,000. 

If you overcharge your tenants, you may face some repercussions. This includes paying your tenant up to three times the excess amount. 

#2: Maryland security deposit interest and storage

Generally, being a Maryland landlord means you should have a separate account to store a tenant’s security deposit. This account should be used solely for security deposits. You must also store the security deposit within thirty days upon its receipt. 

security deposit maryland

For security deposits exceeding $50, you must store them in an interest-bearing account. The account must pay a 3% rate annually and it should accrue every 6 months from the date of the tenant’s deposit receipt. 

You can also store a tenant’s deposit in a financial institution that accepts insured certificates of deposit. 

Tenants can also buy a surety bond that can be used as a security deposit. This type of payment, however, landlords are not required to accept. 

#3: Written notice of security deposit receipt

In the state of Maryland, this is required. As a landlord, you must provide your tenant with a receipt indicating how much you’ve received and when you received it. Additionally, the following information must also be included on the receipt:

  • The tenant has a right to request, within 15 days upon moving in, that the landlord inspects their unit and creates an itemized list of property damages. 
  • When a landlord inspects the property at the end of the lease term, it’s the tenant’s right to be there. Informing the landlord of wanting to be present is required 15 days before move out day. 

You must also keep a copy of the receipt for at least 2 years after a tenant moves out. If you fail to give your tenant a receipt of their deposit, you risk paying your tenant a $25 fine. 

maryland landlord tenant law security deposit

#4: Maryland security deposit deductions

Much like everywhere else, Maryland landlords can keep part or all of a tenant’s security deposit. Common reasons for doing so include:

  • Nonpayment of rent: a key responsibility tenants have to the Maryland lease agreement is the payment of rent. So, if they don’t pay it, you can make the appropriate deductions from their security deposit. 
  • Unpaid utilities: when a tenant signs a lease, they become responsible for paying certain utilities. Upon vacating the unit, they must also ensure they have cleared them. If they fail to do so, the landlord can make the necessary deductions from their deposit. 
  • Excessive cleaning costs: most leases require tenants to leave the premises in the same condition in which they found them, excluding unavoidable wear and tear. If the tenant doesn’t clean, then landlords have a right to make appropriate deductions from the tenants’ deposit to cover the cleaning costs. 
  • Lost rental income: life happens, and a tenant may choose to break their lease early. In such a case, to recover the lost income, you may have to deduct the appropriate amounts from the tenant’s deposit. 

#5: Maryland tenant walk-through inspections 

Maryland tenants have a right to a walk-through inspection. Within 5 days prior to the tenant moving out, the inspection must be performed. 

Once you receive the tenant’s notice to move out, you must notify them of the inspection date. The notice must be placed in writing for record purposes. 

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The goal of a walk-through inspection is to document the property’s condition and give the tenant time to fix any potential violations. 

#6: Maryland security deposit return deadline

In Maryland, landlords have 45 days after a tenant moves out to return all or part of the deposit. It’s also within this period that landlords should return any interest accrued on it. 

You must send the deposit to the tenant’s last known address through first-class mail. If you’re sending only a portion of the deposit, you must also include a written itemized list of any deductions. 

Take note, however, that deductions made in ‘bad faith’ could attract some penalties. For example, you may end up giving the tenant up to 3X the amount wrongfully withheld. 

#7: Selling Maryland property with an active tenancy 

In case the property changes hands during a tenancy, you’ll have two options: The first option is to transfer the deposit, whether in part or in whole, to the incoming landlord. If you choose to do so, then you’ll also need to inform the new owner about things like:

  • The name of each tenant. 
  • A tenant’s last known address.
  • The date you received the deposit.
  • The security deposit amount. 
  • The financial institution holding the funds, as well as the interest rate. 

The other option is to transfer the deposit, whether in whole or in part, to the tenant. In case of any deductions, you must also include an itemized list of deductions as well. 

Still need security deposit help in Maryland? If so, McKenna & Vane Property Management can help. We’re an experienced property management company serving the residents of Howard, Carroll, Frederick and Montgomery Counties.