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Learn about holding a security deposit

Get information about what a landlord's requirements are for holding a security deposit.

Keeping, depositing and holding the deposit

Where may a landlord keep a tenant’s security deposit?

A security deposit remains the property of the tenant until a landlord is authorized to use it. Therefore, a landlord is required to keep a tenant’s security deposit in a separate, interest-bearing bank account in Massachusetts. Each account must also be clearly identified as containing funds that do not belong to the landlord and are being held in trust (escrow) for the tenant.  

What information must be given to the tenant?

Within 30 days of depositing the security deposit, the landlord must inform the tenant in writing of the name and location of the bank where the deposit is being held as well as the amount of the deposit and the account number.  

What if a landlord does not properly hold a security deposit?

If a landlord does not hold a tenant’s security deposit in the proper type of account or fails to give the tenant the required notice of where the funds are deposited, the landlord forfeits (loses) the right to keep the security deposit. The landlord, at the request of the tenant, must immediately return the security deposit to him or her.  

Interest on a deposit

Is a tenant entitled to interest on the security deposit?

A security deposit remains the tenant’s property. Therefore, if the tenancy lasts for a year or longer, the landlord is required to pay interest on the deposit to the tenant.

How much interest and when must it be paid to the tenant?

The tenant is entitled to the amount of interest actually paid by the bank on the deposit. If, however, the landlord fails to deposit the security deposit in a bank, the tenant is entitled to interest at an annual rate of 5%. At the end of each year of the tenancy, the landlord may either pay the interest to the tenant or deduct it from the tenant’s next rent payment.  

Changing ownership

What happens to a tenant’s security deposit if the property changes owners during the tenancy?

If the landlord sells the property or otherwise no longer owns or manages it, the landlord must transfer the tenant’s security deposit, including interest, to the new owner or property manager, who then becomes responsible for retaining it. The new owner or manager has 45 days to give written notice to the tenant of receipt of the security deposit and where it is now being held.

What happens if the former landlord does not properly transfer the security deposit?

If the former landlord does not properly transfer the funds being held in the tenant’s security deposit account to the new owner or manager, the former landlord remains liable to the tenant for return of the security deposit. The new owner or manager is also liable to the tenant for the security deposit (unless the property is now owned by a foreclosing bank or, in the case of unpaid taxes, the city/town), which may be satisfied by allowing the tenant to not pay rent for the amount of time equal to the amount of the security deposit and interest.


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