Insight

Residential Security Deposits Provide Protection for a Landlord, but There can be Unexpected Pitfalls

On tenant’s counterclaims, the court found that landlord had violated the security deposit statute by failing to provide tenant with a receipt acknowledging acceptance of the deposit, and failing to pay interest earned on the deposit over the multi-year tenancy.

Residential Security Deposits
Sander A. Rikleen

Sander A. Rikleen

December 12, 2016 12:00 AM

On April 27, 2016, the ever-perilous legal landscape for Massachusetts residential landlords developed an additional potential pitfall. The statute governing residential security deposits, G.L.c. 186, §15B, imposes several requirements for handling security deposits, all of which must be followed precisely. This has often given landlords a rude surprise, particularly landlords who are renting their own home, or just a few apartments. In Meikle v. Nurse, SJC-11859, the Supreme Judicial Court held that a residential tenant may defend against, and potentially defeat, a landlord’s eviction (summary process) action by asserting landlord’s violation of the security deposit statute.

The case began when landlord sued in the Housing Court, seeking to evict tenant and recover unpaid rent. After trial, the Judge awarded possession to landlord, plus three months of unpaid rent. On tenant’s counterclaims, the court found that landlord had violated the security deposit statute by failing to provide tenant with a receipt acknowledging acceptance of the deposit, and failing to pay interest earned on the deposit over the multi-year tenancy. The trial Judge ruled that the security deposit violations were not a defense to landlord’s claim for possession, and awarded security deposit damages to the tenant, plus interest. After an offset for the Judge’s award of security deposit damages, the tenant still owed a balance of approximately $2,000 in unpaid rent.

On tenant’s appeal, the Supreme Judicial Court reversed, holding that even though the tenant was behind in rent after return of the security deposit plus interest, the security deposit violations may be a defense to landlord’s claim for possession.

The Court neatly breaks the “plain language” of an otherwise unwieldy eviction statute, G.L.c. 239, §8A, into everyday English: “a tenant may retain possession if two conditions are met: (1) the tenant prevails on a counterclaim or defense” related to the landlord-tenant relationship; “and (2) the damages on that defense or counterclaim exceed the amount due the landlord, or if the damages are less than the amount due the landlord, the tenant pays to the court the amount due within one week.” Since the security deposit law violation was related to the tenancy, the Court remanded the case to Housing Court. If tenant pays the balance due landlord to the clerk within the statutory one week time limit, tenant may retain possession of the premises.

Although landlords will not view it as much of a concession, the Court explained that the victorious tenant does not retain the right to possession “in perpetuity.” Once landlord has cured whatever violation was successfully asserted in defense, and tenant has paid any damages owed, landlord may re-institute an eviction action and regain possession so long as there are grounds to do so.

Meikle illustrates the problems Massachusetts landlords encounter when they do not scrupulously follow requirements applicable to residential tenancies. As happened in Meikle, failure to comply with the security deposit statute may expose landlords to return of a security deposit mid-tenancy, treble damages with costs and interest, attorneys’ fees, and potential inability to regain possession from a tenant who is clearly in breach.

Whether renting a single home, apartment, or an entire multi-unit apartment complex, landlords (and tenants) should consult a lawyer familiar with the applicable requirements, learn the complexities of the law, and ensure that they are adhered to without exception.

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