A security deposit is money that belongs to the tenant but is held by the landlord for protection against damages. The tenant is responsible for the rental payments for the entire length of the lease. When the lease has expired, the tenant should have the security deposit returned to them minus the cost to repair any damages to the property.
All or part of the security deposit can be withheld at the end of the lease term if the tenant:
Without the agreement of the landlord, the security deposit may not be used as the last month’s rent. The security deposit should not be used to pay for damages from previous tenants or for normal wear and tear on the property.
Pennsylvania law limits the amount of security deposit a landlord can demand. During the first year of the lease, the security deposit cannot be more than the equivalent of two months’ rent. A landlord might ask the tenant to pay a security deposit plus “the last month’s rent”. Regardless of what a landlord may call these payments, a “last month’s rent” payment is still part of the two-month maximum escrow during the first year.
During the second year or during any renewal of the original lease, the security deposit cannot exceed one month’s rent. If a tenant’s rent increases, the landlord can also increase the security deposit to equal one month’s rent at the new rate for the first five years of the lease. After five years, the landlord cannot increase the security deposit even if the rent is increased.
If a tenant has paid two months’ security deposit (or one month’s security deposit and “the last month’s rent”), then after the first year, the tenant may ask the landlord to return the amount of money held that is greater than one month’s rent. This is done by writing a letter requesting this money be returned.
As a landlord, you should keep detailed records of the amount of the security deposit paid by the tenant along with information regarding what bank account the money is in and any interest rate that is paid on the deposit.
If more than a $100 security deposit is collected:
During times when interest rates are very low, after a landlord deducts the 1% fee, there may be no interest due to the tenant. However, as a matter of doing good business, a landlord should notify a tenant in writing that there is no interest due.
Within thirty (30) days after the termination of the lease, the landlord must give the tenant:
If the landlord fails to do either one of the above within 30 days, he or she has forfeited the right to withhold any of the security deposit or interest and has also given up the right to sue the tenant in court for damages. On the 31st day, the tenant can sue the landlord for double the amount of the security deposit held in escrow plus interest (if any). The burden of proof will be on the landlord to prove that there were actual damages to the rental unit caused by the tenant. These requirements cannot be waived in a lease and any attempt to do so is void and unenforceable.
NOTE: Landlords are held to the 30-day deadline only if the tenant has provided a forwarding address in writing and has returned the keys to the unit.
Remember, if proper notice is not given, the tenant is potentially breaching the lease and may forfeit a refund of the security deposit. If they do not formally end the lease, owe rent, or have not properly surrendered possession of the unit, the landlord may refuse to return the security deposit.
If you fail to return the security deposit and provide the tenant with a written list of damages within thirty (30) days, or if you fail to pay you the difference between the amount of the security deposit and actual damages to the rental unit within thirty (30) days, you will forfeit:
A tenant can file a civil complaint with the Magisterial District Court and sue the landlord for double the amount of the security deposit (including interest, if applicable). A landlord will not be able to file a counterclaim for damages.
If a landlord provides the tenant with a list of damages and a refund within thirty (30) days and the tenant disagrees with the amount of the damages, the tenant can file a civil complaint with the Magisterial District Court. The tenant will have to prove that the landlord has improperly charged them for damages. Again, photos and other documentation will be helpful for this process. The landlord is entitled to file a counterclaim against the tenant.
Both landlords and tenants have to pay filing fees to the Magisterial District Court in order to file a civil complaint. If the Judge’s decision is in the landlord’s favor, the filing fees and expenses shall be paid by the tenant. The following documents should be brought to any court proceeding:
If the tenant fails to give a forwarding address, they are still entitled to the security deposit. However, because of the difficulty the landlord may have in locating the tenant, the landlord does not have to return it within 30 days.
Any lease clause that says a tenant has waived these rights is unenforceable and therefore void.