Maryland Security Deposit Laws in 2024

What is a Security Deposit?

A security deposit is money paid by a tenant at the beginning of a lease to secure a rental unit. The purpose of a security deposit is to cover any damages to the rental unit beyond normal wear and tear that may occur during the tenant's stay. 

The security deposit serves as a form of insurance for the landlord in case the tenant damages the property or fails to pay rent. It can be used to cover the cost of repairing damage caused by the tenant or paying any back rent owed after the tenant vacates the property. The deposit cannot be used by the landlord to cover normal wear and tear or pre-existing damages.

Unlike first month's rent or a holding fee to reserve a rental unit, a security deposit is meant to be completely or partially refundable when the tenant moves out after meeting all terms and conditions of the lease agreement. The amount that must be returned to the renter depends on state laws and whether any deductions were taken out for damage repairs or unpaid rent.

Maximum Allowable Security Deposit in Maryland

In Maryland, landlords are limited in how much they can charge for a security deposit based on whether the rental unit is furnished or unfurnished:

• For an unfurnished unit, the maximum security deposit a landlord can require is equal to 2 months' rent.  
• For a furnished unit, the maximum security deposit a landlord can require is equal to 3 months' rent.

For example, if you are renting an unfurnished apartment that costs $1,000 per month in rent, the maximum security deposit you could be asked to pay is $2,000. However if it was a furnished unit renting for $1,000/month, the maximum could be $3,000.  

These limits apply regardless of what the written lease states. Even if you sign a lease that requires a higher security deposit, Maryland law caps security deposits at 2 or 3 months' rent based on furnished status. Any waiver a tenant signs agreeing to pay more would not be enforceable under 8-203.

Receipt and Notification Requirements

Under Maryland law, the landlord must provide the tenant with a written receipt for the security deposit. This receipt must specify the amount of security deposit collected and note if it is meant for either:

• damages; or
• the last month's rent  

In addition, the receipt must notify the tenant that the security deposit funds will be held by the landlord in an escrow account. 

An escrow account means that the landlord cannot mix the security deposit money with their own funds. It must remain separate for the duration of the tenancy.

By providing this receipt, the landlord acknowledges their legal obligations to:

• Hold the security deposit in a protected manner
• Specify the intended use of the funds  
• Return the full deposit amount to the tenant at the end of their lease, minus any justifiable deductions

Ensuring this receipt is obtained from the landlord when initially paying the security deposit can prevent issues down the line. The tenant has proof that their landlord must adhere to Maryland security deposit law regarding handling and returning said funds.

Interest Requirements on Security Deposits

Landlords in Maryland are required to hold security deposits in an escrow account, separated from their own money or any other funds. They cannot co-mingle a tenant's security deposit with the landlord's own funds or other money. This ensures  proper tracking and return of deposits to tenants.

Additionally, if a security deposit is held for more than 6 months, Maryland law requires landlords to pay 3% annual interest on those funds to the tenant. This interest accrues from the time the deposit was paid by the tenant, not from the end of the 6 months, and applies even if the 6 month mark is midway through a lease. So landlords must calculate interest from day one of receiving a deposit and continue to pay that interest if the deposit is held past 6 months after move in. 

The interest amount would be calculated based on 3% of the total security deposit amount paid by the tenant.  For example, if the security deposit was $1,000, held for 18 months, the landlord would have to pay the tenant $30 in interest (3% of $1,000 is $30 per year x 1.5 years).

This interest amount is above and beyond simply returning the original security deposit amount. It aims to fairly compensate renters when their deposits are held for an extended period of time.

Returning Security Deposits to Tenants  

Maryland law requires landlords to return security deposits, with interest, to tenants no later than 45 days after the day the tenant moves out of the rental property or unit.

Within this 45 day timeframe, the landlord must send the tenant a written list of all damages to the property/unit beyond normal wear and tear, along with a statement of costs actually incurred by the landlord to repair these damages. The costs deducted from the security deposit should be reasonably calculated and match the actual or estimated expenses.

 If no such list is provided, the landlord must return the full amount of the security deposit, plus accrued interest if applicable, to the tenant. A landlord cannot make deductions from the deposit without specifying damages in writing within this 45 day period.  

If the costs to repair damages exceed the amount of the security deposit, the landlord can still seek compensation by taking legal action against the tenant. But they cannot simply keep the full amount of the tenant's security deposit in excess of documented damages.

Some key things for tenants to remember regarding return of security deposits in Maryland:

• Landlord has 45 days after you move out to send an itemized list of deductions and return any deposit balance 
• Failure to do so means they forfeit legal right to make any deductions 
• Dispute unreasonable or unfair deductions in writing  
• Seek legal advice if full deposit is wrongly withheld

Allowable Deductions from Security Deposits  

A landlord may legally deduct from a tenant's security deposit to cover damages beyond normal wear and tear to the rental unit or property. However, the landlord must adhere to the following rules:

Damages Covered

The damages deducted from the deposit must be beyond normal wear and tear. Normal wear and tear is the natural deterioration that occurs from the intended everyday use of the rental unit, even when the property is well-maintained. For example, minor scratches on floors over time and fading paint colors constitute normal wear and tear. Landlords cannot deduct expenses to repair or replace items that fall under normal wear and tear. Things like broken appliances, large stains/damage to carpets, holes in wall, broken fixtures, etc would typically be considered damages beyond wear and tear.  

Written Notice Required

The landlord must provide the tenant a written list of the damages found within 45 days of the tenant vacating the unit. This notice must list in detail all of the excessive damages found beyond normal wear and tear with cost estimates for repairing/replacing each item. It must also specify the remaining balance (if any) of the security deposit owed back to the tenant after these deductions. Without providing this level of detail within the 45 day window, the landlord forfeits their right to make any deductions from the security deposit.

Notice to Tenant of Damages/Deductions 

If the landlord does not intend to return the full security deposit amount to the tenant, they must send the tenant written notice within 45 days after the tenancy ends specifying:

• The list of damages found in the rental unit, beyond normal wear and tear
• Written cost estimates for repairing each damage 
• The remaining balance of the security deposit, if any  

For example, if a tenant paid a $1000 security deposit, and the landlord found $300 worth of damages, the notice to the tenant would look something like this:

List of damages:

• Holes in drywall: $100  
• Stain on carpet: $200

Cost estimates for repair:  

• Drywall patch and paint: $100   
• Carpet cleaning and stain removal: $200  

Remaining deposit after deductions: 

$1000 (Original Deposit) - $300 (Deductions for Damages) = $700

The written notice must be sent to the tenant, by first-class mail, to their last known address within 45 days. If the landlord fails to send proper notice within 45 days, they forfeit their right to withhold any portion of the security deposit.

Tenant Eviction or Abandonment

If the tenant is evicted or abandons the property, the landlord has the right under Maryland law to deduct any unpaid rent and damages from the security deposit, without needing to provide advance written notice to the tenant.

The landlord can use the security deposit funds to cover these deductions and is not obligated to return any remaining deposit to the tenant within 45 days like in a normal end of lease situation.

If the deductions exceed the amount of the security deposit, the landlord can still pursue the tenant separately in court for any remaining unpaid rent or damages. But the security deposit can be fully applied by the landlord immediately in these scenarios without the usual restrictions.

Tenants who are evicted or abandon the property forfeit their rights to advance notice of security deposit deductions. The lease is essentially terminated early by the tenant's actions.

Waivers of Security Deposit Law

Even if a tenant signs a lease that waives their right to the return of a security deposit, the security deposit law in Maryland still applies. Any provision in a lease where a tenant waives their rights under statutory law regarding security deposits is considered void and unenforceable. 

Landlords cannot avoid their legal responsibilities for security deposits by having tenants sign a waiver. Regardless of what any lease says, landlords in Maryland must provide receipts for security deposits, hold the funds in escrow accounts, pay interest after 6 months, return deposits within 45 days, only deduct for damages beyond normal wear and tear, send proper written notice to tenants, etc. Tenants maintain all of their legal rights under Maryland statute 8-203 and 8-203.1.

If a landlord attempts to enforce a waiver and withhold a security deposit illegally, the tenant has full rights under the law to pursue legal action to recover their deposit in full. Even if you signed a waiver, you should still expect a full refund of your deposit if no legitimate deductions apply. Do not let an unenforceable waiver prevent you from exercising your rights as a tenant and seeking the full return of your security deposit.

Getting Your Full Deposit Back

If your landlord does not return your security deposit within 45 days or you dispute any damages they deducted from your deposit, you have the right to pursue legal action to recover your full security deposit under Maryland law. 

You can file a complaint against your landlord with the Maryland Attorney General's Office. The Consumer Protection Division may be able to help mediate the dispute or refer you to free or low-cost legal help.

You can also file a claim against your landlord in Maryland's District Court to recover up to $5,000 in damages, which covers most security deposit amounts. The court can award double the amount of the security deposit improperly withheld by the landlord as a penalty. You may also be able to recover court costs and reasonable attorney's fees.

It's recommended you send a demand letter to the landlord first outlining the deposit amount owed and giving them a deadline to return it before taking legal action. This shows you made a good faith effort and demonstrates the validity of your claim. Keep records of all communication and documentation showing your right to the full return of your deposit.

The security deposit law is designed to protect tenant rights. Don't let a landlord take advantage and wrongly withhold any part of your deposit. Seek help to recover your money if the landlord does not comply with their legal obligations.