Security Deposits: The Latest Major Decision
It has always been a risky proposition for a landlord to take a security deposit from a tenant in Massachusetts. But as a result of a recent decision by the Massachusetts Appeals Court, tenants have acquired even greater leverage in dealing with landlords who fail to exercise caution in handling deposits.
In Taylor v. Beaudry, the court held that the statutory remedy of triple damages is mandatory if a landlord commits any of the following errors with respect to the deposit:
1. Fails to place the deposit in an account beyond the reach of the landlord's creditors.
2. Fails to provide the tenant with a written receipt identifying the bank in which the deposit is being held, and the account number.
3. Fails to transfer the deposit to a successor landlord; or
4. Fails to return the deposit (with deductions, if applicable) within 30 days of the termination of the tenancy, and in compliance with the statutory requirements.
The last category is the one that i most likely to lead to triple damage recoveries, or at least settlements that result from the valid prospect of such a recovery. Under the security deposit statute, a landlord must provide a letter of accounting to the tenant within 30 days following termination of the tenancy. The letter, which must be signed "under the pains and penalties of perjury", must identify any amounts deducted from the deposit. To the extent that deductions are made, they must be supported by copies of bills or estimates, and no deductions may be made for "reasonable wear and tear" (in other words, a landlord typically cannot deduct the cost of re-painting the apartment), If there are unpaid tenant utility bills, only unpaid water bills (and not electric or gas) may be deducted. If any of these requirements are not followed, under the Taylor case the tenant is entitled to three times the deposit (and attorney's fees) as a matter of right.
The greatest amount of litigation action resulting from this decision will involve "mom and pop" or small landlords, most of whom have no idea that their deposit accounting letters must be signed under the pains and penalties of perjury and that the mere failure include this magical language can result in liability in the amount of three times the deposit.