As landlord tenant law in Massachusetts evolves, seemingly on a case-by-case basis, Landlords should be aware of what they are able to charge a tenant or prospective tenant. While it is widely understood that a landlord can collect first month’s rent, last month’s rent, and a security deposit, some landlords have begun collecting a “holding fee,” a fee that holds the apartment for the prospective tenant until they ultimately decide whether or not to sign a lease. This holding fee will generally either be applied to a security deposit if the prospective tenant signs a lease, or returned, usually with conditions attached, if the tenant passes on the rental property. Are these types of holding deposits legal?
In Massachusetts, the answer is no. While holding deposits seem to be on the rise, landlords should know that a recent Housing Court case, which was affirmed after appeal to the Appeals Court, finds holding deposits to be against Massachusetts law. The Court found that, pursuant to G.L. c. 186 s. 15B(1)(b), landlords may only require prospective tenants to pay the following:
- Rent for the first full month of occupancy; and
- Rent for the last full month of occupancy calculated at the same rate as the first month; and
- A security deposit equal to the first month’s rent provided that such security deposit is deposited as required by subsection (3) and that the tenant is given the statement of condition as required by subsection (2); and,
- The purchase and installation cost for a key and lock.
Under the statute, the only recoverable damages by a landlord in a deposit are those specific damages for property damage or unpaid rent, which are only available as remedies for the landlord if the security deposit was properly held and maintained. If a holding deposit made by a prospective tenant is then converted into a security deposit when the tenant signs on the dotted line of the lease, a landlord may shield themselves from vulnerability. If the prospective tenant does not sign the lease and the holding deposit is maintained as “liquidated damages,” landlords are exposing themselves to a heap of issues, including an unfair and deceptive act under G.L. c. 93a. Best practices for Landlords should be to only collect first month rent, last month rent, and a security deposit (not to exceed the first month’s rental mount) and not attempt to collect anything from tenants beyond that at the beginning of a tenancy.
If you have questions or would like to discuss these matters, please contact Drayton Law at 508-618-7270.
This blog is for informational purposes only. It should not be considered legal advice. All those who read this blog should seek the advice of a professional before taking action based upon any information provided herein.
