Security Deposits
Security Deposit
A security deposit is money that belongs to the tenant but is held by the landlord for protection against damages. The tenant is responsible for the rental payments for the entire length of the lease. When the lease has expired, the tenant should have the security deposit returned to them minus the cost to repair any damages to the property.
All or part of the security deposit can be withheld at the end of the lease term if the tenant:
- Damages the rental property
- Fails to clean the unit properly
- Fails to pay the last month’s rent or owes any rent
- Breaches the lease by moving out before the end of the lease term without advance notice and obtaining the agreement of the landlord
Limits on the Amount of the Security Deposit
Pennsylvania law limits the amount of security deposit a landlord can demand. During the first year of the lease, the security deposit cannot be more than the equivalent of two months’ rent. A landlord might ask the tenant to pay a security deposit plus “the last month’s rent”. Regardless of what a landlord may call these payments, a “last month’s rent” payment is still part of the two-month maximum escrow during the first year.
During the second year or during any renewal of the original lease, the security deposit cannot exceed one month’s rent. If a tenant’s rent increases, the landlord can also increase the security deposit to equal one month’s rent at the new rate for the first five years of the lease. After five years, the landlord cannot increase the security deposit even if the rent is increased.
If a tenant has paid two months’ security deposit (or one month’s security deposit and “the last month’s rent”), then after the first year, the tenant may ask the landlord to return the amount of money held that is greater than one month’s rent. This is done by writing a letter requesting this money be returned.
As a landlord, you should keep detailed records of the amount of the security deposit paid by the tenant along with information regarding what bank account the money is in and any interest rate that is paid on the deposit.
Interest on the Security Deposit
If more than a $100 security deposit is collected:
- The funds must be placed in a separate account.
- The account must be with an institution regulated by the Pennsylvania or Federal banking authorities.
- The landlord must notify the tenant in writing with the name and address of the depository (bank) and amount of deposit.
- After the second year, the interest earned on the tenant’s money (less a 1% administrative fee to landlord) must be paid to the tenant annually on the anniversary date of the lease.
- The law does not specify how much interest a tenant must receive.
During times when interest rates are very low, after a landlord deducts the 1% fee, there may be no interest due to the tenant. However, as a matter of doing good business, a landlord should notify a tenant in writing that there is no interest due.
Return of the Security Deposit
Within thirty (30) days after the termination of the lease, the landlord must give the tenant:
- A check for the entire amount of the security deposit or
- A written list of any damages caused by the tenant and any remaining security deposit money (plus interest, if any) minus the cost of the repair of damages
If the landlord fails to do either one of the above within 30 days, he or she has forfeited the right to withhold any of the security deposit or interest and has also given up the right to sue the tenant in court for damages. On the 31st day, the tenant can sue the landlord for double the amount of the security deposit held in escrow plus interest (if any). The burden of proof will be on the landlord to prove that there were actual damages to the rental unit caused by the tenant. These requirements cannot be waived in a lease and any attempt to do so is void and unenforceable.
NOTE: Landlords are held to the 30-day deadline only if the tenant has provided a forwarding address in writing and has returned the keys to the unit.
Remember, if proper notice is not given, the tenant is potentially breaching the lease and may forfeit a refund of the security deposit. If they do not formally end the lease, owe rent, or have not properly surrendered possession of the unit, the landlord may refuse to return the security deposit.
If you fail to return the security deposit and provide the tenant with a written list of damages within thirty (30) days, or if you fail to pay you the difference between the amount of the security deposit and actual damages to the rental unit within thirty (30) days, you will forfeit:
- All rights to keep any portion of the security deposit (including interest)
- All rights to sue the tenant for damages to the rental unit (however, you may still sue the tenant for
collection of unpaid rent or breach of lease)
A tenant can file a civil complaint with the Magisterial District Court and sue the landlord for double the amount of the security deposit (including interest, if applicable). A landlord will not be able to file a counterclaim for damages.
If a landlord provides the tenant with a list of damages and a refund within thirty (30) days and the tenant disagrees with the amount of the damages, the tenant can file a civil complaint with the Magisterial District Court. The tenant will have to prove that the landlord has improperly charged them for damages. Again, photos and other documentation will be helpful for this process. The landlord is entitled to file a counterclaim against the tenant.
Both landlords and tenants have to pay filing fees to the Magisterial District Court in order to file a civil complaint. If the Judge’s decision is in the landlord’s favor, the filing fees and expenses shall be paid by the tenant. The following documents should be brought to any court proceeding:
- A copy of the signed lease
- Documentation or proof that the key(s) were returned or not returned
- Documentation or proof that the tenant provided a forwarding address or failed to provide a forwarding address
- A copy of any correspondence that you sent to the tenant regarding the security deposit
- A copy of any correspondence with the tenant explaining why the full amount of the security deposit was not returned
- All rent receipts (or canceled checks)
- Security deposit receipt (or canceled check)
- Photos or videos (be prepared to say who took them and when) showing proof of the condition of the leased premised before the tenant moved in
- Any witnesses who know the condition of the rental property before the tenant moved in and after they moved out
- All receipts for repairs and cleaning the unit
If the tenant fails to give a forwarding address, they are still entitled to the security deposit. However, because of the difficulty the landlord may have in locating the tenant, the landlord does not have to return it within 30 days.
Any lease clause that says a tenant has waived these rights is unenforceable and therefore void.
What Can Be Charged Against the Security Deposit?
A landlord may retain some or all of the security deposit to make repairs for damage other than normal wear and tear. A landlord can keep a security deposit to cover any unpaid rent at the end of the lease term. A security deposit may also be forfeited if the tenant breaks the lease early. The landlord can charge the tenant for cleaning a rental unit after move-out if the tenant failed to do so—but the charges should be reasonable and only bring the property back to the condition it was in before the tenant moved in.
A tenant is not responsible for damages caused by previous tenants. Proper photo documentation of the condition of the unit before the tenant moves in and after they vacate the unit is an essential part of protecting the landlord’s interest should damages occur.
Normal Wear and Tear
Normal wear and tear is the ordinary deterioration of a property due to normal everyday use. It is not damage caused by abuse or neglect. There is a difference between normal wear and tear and damage done to a property. Carpet that is matted is normal wear and tear. Burns or extensive staining on a carpet is damage caused by negligence. Fading or yellowing paint is considered normal wear and tear. Large stains or holes in the wall are compensable damages to the landlord. The landlord should not charge the tenant for ordinary wear and tear. For example, if a landlord decided the apartment needed to be repainted at the end of a lease, a tenant should not be charged for the repainting unless the tenant caused more than normal wear.
