As a landlord, you have a lot of responsibilities. One of your most important duties as a landlord is to protect your tenant's security deposit as outlined in the lease throughout the entire lease term. In this blog post, we will teach you everything you need to know about the security deposit law in Maryland.

We will cover the limits on security deposits, how to store them, providing a receipts to a tenant, damages that can be deducted from them, the timeframe in which Maryland landlords must refund them, and a tenant's rights. Following these tips will help ensure that a landlord is in compliance with Maryland landlord-tenant law!

Your Guide to Security Deposits

Why Security Deposits are Useful

A security deposit can serve many purposes when it comes to maintaining a rental unit, including the following:

  1. Helping a landlord cover the cost of unpaid rent from tenants: If a tenant has unpaid rent, collecting a security deposit can help protect the landlord from losing money as it can cover last month's rent. If a tenant purchases their own furniture or appliances for the leased premises, the landlord has no claim to them
  2. Helping to cover the cost of end of lease cleaning: You may only charge a cleaning fee if the tenant agrees, or if cleaning is required in order to return the home back to its original state after the tenant moves out. Regardless of the circumstances, collecting a security deposit can help keep the rental property in top shape if necessary.
  3. Covering the cost of repairs exceeding normal wear and tear on the premises: When a landlord inspects the rental unit, they may find there's damages. If a tenant or a tenant's family causes excessive damage to the rental unit, during their tenancy, that goes beyond normal wear and tear, then the landlord may use the deposit to help cover the cost of the repairs and pay the actual costs incurred. This helps you protect your property and keep it in the best condition possible. A landlord must keep their property safe.

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Maryland Security Deposit Limit

Many states have limits to how much a landlord may charge their tenant for a security deposit, and this includes Maryland! According to Maryland law, a landlord must comply with this limit, though you can always charge less, like a month's rent.

According to Maryland landlord-tenant laws, the maximum amount a security deposit a tenant pays may be is two months' rent, regardless of the number of tenants living in one property. However, a landlord may also ask for an additional pet deposit if applicable which is added onto the two months' rent. If a tenant notifies the landlord that they're leaving, the security deposit must be returned.

According to Maryland security deposit law, if the landlord charges more than the allowed amount for a security deposit, then the tenant may claim up to triple the amount of the original fee plus reasonable attorney's fees.

Storing Security Deposits

How should a landlord store security deposits? The Maryland law requires landlords to hold the security deposit funds from their tenants in separate interest-bearing accounts at federally insured financial institutions. A landlord must follow this.

These institutions may also accept insured certificates of deposit, no matter if it's an interest-bearing account or otherwise. Part of a tenant's rights is the right to know where their deposit is kept. If a landlord fails to disclose this, this is illegal. Avoid security deposit disputes and follow these easy regulations!

Written Notice After Security Deposit Receipt

A landlord must provide the tenant with a receipt for the security deposit. This receipt must include the following:

  • A detailed list of damages to the property in excess of ordinary wear and tear inspected by both the landlord and the tenant
  • Informing the tenant that the landlord has an obligation to notify them of the date of the inspection, and that the tenant has the legal right to be present for said inspection of the property.
  • The tenant’s right to receive a written list of deductions from the security deposit amount after moving out, in addition to the remaining funds.
  • A written statement detailing the consequences the landlord will be faced with should they fail to return the deposit funds, if they fail to adhere to any other security deposit rules and regulations, or if they are in breach of lease.
  • A statement saying that the landlord will keep a copy of the receipt for 2 years after the end of the tenancy.
  • The name of the financial institution where it is being kept

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If the landlord fails to provide the tenant with this written receipt for their security deposit, then the landlord must pay the tenant $25.

Reasons That a Landlord May Withhold a Security Deposit

What allows a landlord to use the security deposit? A landlord may make deductions from a tenant’s security deposit to cover the cost of the following issues:

  • The tenant has unpaid rent
  • Lost funds caused by the tenant's breach of the written lease agreement
  • Cost of repairs for damage to the premises caused by the tenant in excess of ordinary wear and tear as outlined in the lease.

Walk-Through Inspections

At the beginning of their lease agreement and tenancy, a tenant has the legal right to be present for a walk-through of the rental under Marylander law, taking note of any damages exceeding ordinary wear and tear that may have been present prior to the tenant moving in.

As the tenant nears the end of their written lease and tenancy, they also have the right to request a move-out walk-through inspection. The landlord must then choose a date for the inspection that is within 5 days before or after the end of the lease, as long as they provide the tenant with proper notice.

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These rights should be included and explained in the initial rental agreement, leaving no room for confusion. If the landlord does not provide the tenant with adequate notice prior to the inspection of the property, then they will not be able to retain any of the security deposit and must return all of the funds back to the tenant, regardless of any damages. This can be done through certified mail.

Refunding the Security Deposit

A landlord has 45 days from the end of the tenancy to return any remaining funds from the security deposit plus interest back to the tenant. Written notice must be provided to the tenant, including an itemized list of the deductions that were made.

If the landlord does not provide an itemized list of deductions to the tenant, then the landlord forfeits the right to keep any funds from the security deposit, regardless of the damage to the property.

If the landlord fails to return the owed funds to the tenant after the end of the lease, they may face tangible legal consequences. A landlord who has not paid back the security deposit, plus interest, within the 45-day limit may end up being liable to pay up to 3 times the amount of the original deposit, plus reasonable attorney's fees.

Change in Ownership of the Rental Home

If a landlord decides to sell or change ownership of the home, what happens to the security deposit? A tenant's intention to stay or leave the property does not change the fact that the deposit needs to stay safe.

Under the Maryland landlord-tenant laws, when the property has transferred ownership, the new landlord will be responsible for the deposit, adhering to whatever conditions were previously defined on the tenant’s rental agreement written up by the former landlord.

Bottom Line

We hope that this article will help you understand your rights and responsibilities when it comes to security deposit law in Maryland. If you have any questions or concerns, don’t hesitate to reach out to the professionals at American Dream Realty and Management!

We have garnered years of experience helping dozens of our clients ensure that they are compliant with all security deposit laws - and we can help you too! Call us today and you will get a FREE rental analysis as well.

Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney. Laws frequently change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.