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Friday, December 5, 2014

Rental law: What fees a landlord may charge, and what to do with the funds.

Originally published on The Law Office of Andrew Lynn web site at http://wp.me/p4HBwE-2i

In the past few weeks I’ve seen a surprising number – at least half a dozen – of instances of Massachusetts landlords violating state law by either charging a prohibited fee, or failing to correctly account for a tenant’s security deposit. The rules here are firm but straightforward, so here is a short overview that I hope will prove informative to landlords and tenants alike.

As usual, this overview applies in Massachusetts only, and is for educational purposes, not legal advise. If you have any questions or want to know how the law would apply in any particular situation, please contact me directly at andrew@andrewlynnlaw.com or through one of the contact forms on this site.

Fees a landlord may charge

First: While processing a prospective tenant’s application, a landlord or a landlord’s agent may require a credit check, and may charge a reasonable fee to cover that expense. Even if the applicant’s real estate agent has already run a credit check, the landlord is not required to accept it and may require an additional check.

Second: Once an application is accepted, upon execution of a lease a landlord may charge:
  1. First month’s rent.
  2. Last month’s rent.
  3. A reasonable fee to cover the actual cost of keys and changing locks.
  4. A security deposit, which may not be more than one month’s rent.
Third: Each month the landlord may require payment of rent, except of course the first and last months if those rents have already been paid.

That’s it!

No other fees or deposits are allowed. There is no “rental deposit” permitted under Massachusetts law, nor is there a “pet deposit”. There is no facility fee, and fees for parking or gym use may only be charged if those are optional services that the tenant is free to not accept. If the landlord wants the tenant to pay for any of these things, they must be rolled into the monthly rent. Don’t try to get too clever on this either. For example, doubling the first or last month’s rent to cover extra expenses doesn’t work. The rent must be the same each month, with a few exceptions (such as offering free months as an incentive to sign a multiyear lease, which is something that some larger buildings have offered lately).

What to do with the funds

Note: This information is not complete: for example, the explanations of paperwork a landlord gives a tenant are an outline only, because the law includes redundancies and specific required language that would make this post excessively long.
  1. The landlord may keep the first month’s rent.
  2. The landlord must give the tenant a receipt for the last month’s rent and must deposit that rent in an interest-bearing account. The landlord must keep an accounting of the interest earned, and at the end of the lease (or the end of each year of the lease, if the lease is for more than one year) must send the interest to the tenant.
  3. The landlord must use the lock and key fee, if any, to pay for locks and keys.
  4. The landlord must deposit the security deposit into a separate, segregated, interest-bearing account, and provide the tenant a receipt. Again, the interest will go to the tenant.
Security deposit rules

The security deposit is only for repairing damage caused by the tenant, so if the landlord charges one the tenant must be given a statement of the initial condition of the apartment – and the tenant may also give the landlord a list of any damage that is present at the start of the lease, to avoid being charged for it later. If the landlord uses security deposit funds to pay for any repairs, the landlord must keep records of the work done and the amount paid.
Any security deposit funds not used to pay for repairs must be refunded to the tenant within 30 days of end of lease. That’s a firm requirement. Landlords: Don’t use security deposits to pay for cleaning, or for regular maintenance and upkeep, or to make up for any unpaid rent! If there is unpaid rent, feel free to write the tenant a bill but send the security deposit back anyway. If the tenant says “I don’t want to write a check, you can just keep my deposit instead,” you reply “Sorry but no, I can’t do that.”

Stay out of trouble

A majority of the landlord-tenant disputes I see relate to violations of these rules. Follow them strictly, and you will avoid a lot of expensive, time- and resource-consuming trouble.