Security Deposits. A security deposit (sometimes referred to as a damage deposit) is a sum of money that a landlord may charge a tenant to ensure that the rented property is not damaged or to ensure that the tenant does not default in any payments. A security deposit is not the same as rent because a security deposit is money owned by the Tenant (not the landlord). At the conclusion of the tenancy, the deposit is to be returned to the Tenant with interest unless there has been an authorized deduction to address repairs. In the first year of a residential lease, the landlord may not charge a security deposit that is greater than twice the monthly rental amount. At the beginning of the second year of a lease, the landlord must return any deposit amount that exceeds the value of one month's rent.
Interest on Security Deposit. In Pennsylvania, a security deposit of greater than $100 is required to be held in a Federally regulated escrow account and the landlord is required notify each of the tenants in writing, giving the name and address of the banking institution in which such deposits are held. Furthermore, if the funds are held for more than two years, they must be placed in an interest bearing escrow account. As an alternative to maintaining the funds in an interest bearing escrow savings account, a landlord is permitted to secure those sums with a bond, however, the interest must still be awarded to the tenant. At the end of each rental year, the landlord is required to pay interest dividends to the tenant.
Failure to Return A Security Deposit. Within thirty (30) days of the end of a lease, a landlord must provide a tenant with a written list of any damages to the premises for which the landlord claims the tenant is responsible. Delivery of that list shall be accompanied by payment of the security deposit (plus interest) less any deductions for damages. Any landlord who fails to provide a written list of damages within thirty (30) days forfeits all rights to withhold any portion held in escrow or to bring suit against the tenant for damages to the premises. Any landlord who fails pay the escrow amount (i.e. deposit plus interest) within thirty (30) days can be liable to the tenant for double that amount. In order to invoke these protections against the landlord, the tenant must first inform the landlord in writing of his or her new address at the time the lease ends.
Tips on Security Deposits.
· Photograph (and document) all known issues when moving into or leaving.
· Promptly report in writing all repair issues that arise during the life of the rental.
· The first year deposit can be no greater than twice the monthly rental amount.
· After the first year, the deposit must be equal to or less than one month’s rent.
· At end of rental, provide landlord (in writing by certified mail) with new address.
· When moving out, make sure the rental is clean and neat
· Save all letters (and envelopes) as well as all documents provided by the landlord.
· Read your lease and make sure you understand all key aspects