Another Reason a Residential Landlord May Not Want to Ask for a Security Deposit

Some seasoned landlord/tenant practitioners and even judges advise residential landlords to forego requesting security deposits from their tenants. Massachusetts law allows a landlord to require a tenant to pay at or prior to the commencement of a tenancy the first month’s rent, last month’s rent, a security deposit (equal to the first month’s rent), and the purchase and installation cost for a key and lock. So why would a landlord not demand a security deposit as protection for a tenant’s non-payment of rent or damages to the rental unit?

The answer is that the Massachusetts statute dealing with security deposits (G.L. c. 186, § 15B) is so technical and its penalties so severe, that it may not be worth the risk that a landlord may not follow the letter of the law and can be held liable for three times the amount of the security deposit, plus the tenant’s attorney’s fees and costs!

As a result of a recent case decided by the Massachusetts Supreme Judicial Court, Meikle v. Nurse, landlords now have an additional reason to refrain from collecting security deposits. The court held that a tenant can raise the landlord’s violation of the security deposit law, even a minor violation, as a defense to a landlord’s eviction action (known as “summary process proceedings”) even where the tenant has failed to pay rent and may owe thousands of dollars. While it was always clear that a tenant could raise a counterclaim concerning the landlord’s violation of the security deposit statute, it was unsettled whether such a violation could be a defense to an eviction, thus preventing the landlord from obtaining possession of the rental unit. While the violation of the security deposit law will not absolve the tenant’s obligation to pay rent, if the tenant’s damages resulting from the violation of the security deposit law (and other permissible counterclaims) exceed the amount due the landlord for rent, or even if the damages awarded the tenant are less than the amount due the landlord and the tenant pays the balance due within a week of the court’s decision, the landlord will be denied recovery of possession of its property.

It has been said that Massachusetts is one of the most landlord-unfriendly jurisdictions in the country, and this recent decision certainly will not dispel this notion.