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Security Deposits and Landlord/Tenant Issues

Many of P.K. Hammar Legal’s clients are commercial or residential landlords, and many of our clients rent space in both commercial and residential buildings. While the law presumes that commercial landlords and tenants have equal knowledge and bargaining power, residential tenants are often afforded extra protection because of the perceived unequal bargaining power between residential renters and the supposedly more savvy rental real estate owners. While this is not necessarily the case, residential landlords and tenants alike should make every effort to educate themselves as to their respective rights and responsibilities regarding the lease agreements they must enter into in order to rent or occupy real property.

Security Deposits
One area of the law in particular seems to cause more problems for our clients than others, and that is the law regarding the acceptance and return of security deposits. Maryland, Virginia and the District of Columbia have differing rules for the treatment of security deposits and you should of course consult an attorney barred in the jurisdiction in which the rental property is located for definitive advice. Using Maryland law as an example, the law governing security deposits can be found in Section 8-203 of the Real Property Article, Annotated Code of Maryland.

One of the most frequent mistakes landlords make concerning security deposits is charging tenants a higher deposit than allowed by law. According to Section 8-203(b)(1), “a landlord may not impose a security deposit in excess of the equivalent of two months’ rent per dwelling unit, regardless of the number of tenants”. Section 8-203(b)(2) states that “if a landlord charges more than the equivalent of two months’ rent per dwelling unit as a security deposit, the tenant may recover up to threefold the extra amount charged, plus reasonable attorney’s fees”.

The Law Sets a Hard Cap, Regardless of How A Security Deposit Is Labeled
Some landlords, perhaps aware of the above prohibition, nevertheless attempt to improve their position regarding future tenant damages by calling a portion of the security deposit a “pet deposit”, or “last month’s rent”. These landlords would be wise to read Section 8-203(a)(3) of the Real Property Article, which clearly states “ ‘Security Deposit’ means any payment of money, including payment of the last month’s rent in advance of the time it is due, given to a landlord by a tenant in order to protect the landlord against nonpayment of rent, damage due to breach of lease, or damage to the leased premises, common areas, major appliances, and furnishings”. Thus, despite a landlord’s understandable desire to require as much of a security deposit as a tenant is willing to pay, charging a deposit in excess of the statutory amount can turn into an expensive lesson for the unwary.

At P.K. Hammar Legal we have attorneys licensed to practice in Maryland, Virginia, the District of Columbia, Pennsylvania and even Florida. If you are entering into or otherwise subject to a lease agreement of any type, it pays to consult us for an explanation of your rights and responsibilities. As the judge will tell you, ignorance of the law is no excuse.

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