As a landlord in Massachusetts, there are many laws you must acquaint yourself with. One of them being the statewide security deposit law. 


Requiring tenants to pay a security deposit is important when managing an investment property. It safeguards a landlord against a myriad of potential liabilities, ranging from unpaid rent to excessive property damage. 


The following is everything you need to know about security deposit laws in Massachusetts. 


Security Deposit Limits in Massachusetts


As a Massachusetts landlord, you cannot charge more than one month’s rent for a security deposit. So, if your tenants are paying a monthly rent of $2000, you cannot charge them no more than $2000 as a security deposit. 


In addition to the security deposit, you can also collect separate advance amounts for the following. 

  • First month’s rent
  • Last month’s rent
  • Purchase and the installation cost for key and lock


If you do collect the last month’s rent, then you must provide the tenant with a receipt. You must specify the following in the receipt:

  • The rent amount received
  • The date you received it
  • That its purpose is to cover the last month of the tenancy
  • Your name, as the person receiving it
  • The unit’s description
  • A statement indicating the tenant’s entitlement to interest on the last month’s rent
  • A statement requiring the tenant to provide a forwarding address


Security Deposit laws in Massachusetts


How to Store a Security Deposit in Massachusetts


In Massachusetts, a landlord must store a tenant’s deposit in a separate account. The account must also be interest-bearing. 


You must pay the tenant an annual interest rate of either 5% or the bank account’s interest rate. The tenant has a right to deduct the interest on their next rent payment. 


Every year, you must also provide the tenant with a written notice stating:     

  • The banking institution’s name and address
  • The amount of security deposit 
  • The interest rate
  • The number of the account where you’re holding the security deposit


A Landlords Right to Use the Security Deposit


Massachusetts landlords can keep part or all of their tenants’ security deposits under certain conditions.

The following are the most common reasons: 

  • To cover unpaid rent. Once a tenant signs a lease, they are liable for paying rent for the entire duration of the lease agreement. If a tenant stops paying rent at any point and breaks the lease, you can use part or all of the deposit to cut your losses. 
  • To cover water bills. Before a tenant moves out, they must ensure they have cleared all utility bills in their name. If they don’t, you can use all or part of their deposit to cover that cost. 
  • To cover damage that exceeds normal wear and tear. Examples of these include a broken toilet seat, a broken bathroom mirror, and a broken door handle. 
  • To cover unpaid real estate taxes that the tenant may be obligated to pay. 


Massachusetts security deposit receipt


A Security Deposit Receipt


In Massachusetts, landlords must provide their tenants with 3 separate notices. 

1.    Immediate Notice. After receiving the tenant’s security deposit, you must provide the tenant with a receipt immediately. In the receipt, you must state the security deposit amount, the date you received it, and your name or the agent’s name. 

2.    Statement of the Property’s Condition. 10 days after receiving the deposit, you must notify the

tenant about the property’s condition in a separate notice. In the notice, you must state any pre-existing damage and sign it off. 

3.    Name and address of the bank storing the tenant’s deposit. You have 30 days after receiving the

tenant’s deposit to notify them of the banking institution holding their deposit. If you fail to do so, the tenant would be entitled to receive a full refund of their deposit immediately. 


Keeping Records of Security Deposits


As a landlord in Massachusetts, there are certain records you must keep in regards to a tenant’s deposit. The records should include things like:

  • Description of any pre-existing damage to the rented unit
  • The date the tenancy ended  
  • Records of any damages that have been repaired  
  • Copies of any other notices you may have given to the tenant like a statement of condition and
  • security deposit receipt 


Keeping records of security deposits in MA


Return the Tenant’s Security Deposit


You have 30 days once the tenancy ends to return the tenant’s deposit, minus any allowable deductions. If you’ve made any deductions, then you must provide the tenant with an itemized list of deductions. 


If you fail to return their deposit within the stipulated time, you may be liable to certain penalties including, paying the tenant up to 3 times the withheld amount, 5 percent interest, plus attorney’s fees and costs of suit. 


What Happens if You Sell the Property? 


Should the property change hands, you’ll be responsible for transferring the deposit (plus accrued interest) to the incoming landlord. It’ll then be the responsibility of the new owner to notify the tenant that they are now in possession of their deposit. The new owner must do so within 45 days. 




These are some of the stands laws that all landlords should be aware of with regards to security deposits. You should also familiarize yourself with Massachusetts landlord-tenant laws


If all this seems overwhelming, consider contacting a trusted property management company. They can help you keep track of security deposits, rent collection, handle the eviction process, and more.


Boston Green Property Management is an experienced and professional property management company serving the greater Boston area. Speak to one of their qualified real estate professionals today for more information!


Disclaimer: This information in this piece is only intended to be educational and is in no way a substitute for professional legal advice. For expert help contact a legal professional or reputable property management company.