Security deposits in Maryland are regulated by Maryland Code, Real Property, § 8-203 to § 8-203.1. Certain municipalities may have local laws that supplement state regulations. To ensure full compliance, verify the regulations applicable in your area.

Maryland: KEY POINTS AT A GLANCE

Deposit Cap: 1x Monthly Rent (with exceptions)

Holding Requirements: Yes

Interest Required: Yes

‍Return Window: 45 days

COLLECTION & HOLDING REQUIREMENTS

Deposit Cap: Security deposits are generally limited to one month’s rent. However, a landlord/property manager may require a security deposit of up to two months’ rent if (1) the tenant has qualified for utility assistance through the Department of Human Services; (2) the lease requires the tenant to make payments for utility services directly to the landlord; (3) the tenant and the landlord/property manager agree in writing to a higher amount; or (4) the tenant purchases a surety bond to cover the full amount, or a portion, of the security deposit.

Holding Requirements: The security deposit must be held in an interest-bearing account at a federally insured financial institution in Maryland. It cannot be commingled with the landlord/property manager’s personal funds. In lieu of an interest-bearing account, the landlord/property manager may hold the security deposit in an insured certificate of deposit at a federally insured financial institution in Maryland or in securities issued by the federal government or the state of Maryland.

Information Provided to Tenant: Landlords/property managers must give tenants a receipt for the security deposit which provides the disclosures outlined in Maryland Code § 8-203.1, including that the tenant has the right to inspect the premises at the beginning of the tenancy and be present when the landlord/property manager inspects the premises at the end of the tenancy.

‍Interest on Deposits: Landlords/property managers must pay interest on cash security deposits, unless the deposit is held for less than 6 months or is less than $50. The required interest rate is the greater of (1) the daily U.S. treasury yield curve rate for 1 year, as of the first business day of each year, or (2) 1.5% annually. Interest must accrue in monthly intervals from the day the tenant gives the landlord/property manager the security deposit. The Maryland Department of Housing and Community Development maintains a calculator on its website (HERE) to assist in calculating the interest due on a deposit.

RETURN

Timeline: Within 45 days of the tenant’s vacancy, the landlord/property manager must either (1) return the full security deposit and accrued interest to the tenant or (2) provide the tenant with a written statement of deductions to the security deposit along with the remaining portion of the security deposit and accrued interest. The landlord/property manager must send the deposit, accrued interest, and statement of deductions, if any, by first-class mail to the tenant’s last known address. 

Documentation of Deductions: The written statement of deductions delivered to the tenant must include a list of damages and supporting documentation that identifies the estimated or actual cost of repairs. If the landlord/property manager provides the estimated costs of repairs, they must notify the tenant in writing when the repairs have been completed and send them copies of any final invoices. If the actual costs incurred by the landlord/property manager are less than the estimate provided in the itemized statement, the landlord/property manager must return the amount of the security deposit withheld that exceeds the actual costs incurred within 30 days of completing the repairs.

Permissible Deductions: Landlords/property managers may deduct the following from security deposit funds:

• Unpaid rent
• Damages beyond normal wear and tear

Penalties: Failure to return the security deposit and accrued interest or provide a written statement of deductions as required may result in the landlord/property manager being liable for up to 3x the amount wrongfully withheld, plus reasonable attorney’s fees and court costs if the tenant wins in a lawsuit.

SALE OF THE RENTAL PROPERTY

If the property is sold, the landlord/property manager remains liable to the tenant for the security deposit until they deliver the security deposit to the new owner with an accounting showing the amount of the security deposit, the original date of receipt from the tenant, the interest rate(s) applicable to the security deposit, and the tenant’s name and last known address.

SECURITY DEPOSIT ALTERNATIVE REQUIREMENTS 

Surety Bond: Landlords/property managers may, in their discretion, offer tenants the option to purchase a surety bond in lieu of providing some or all of the security deposit. However, they may not require tenants to purchase a surety bond, nor are they required to consent to their tenants purchasing a surety bond. The bond may only be issued by a carrier licensed by the Maryland Insurance Administration.

In the event a surety bond is purchased by the tenant, the new owner must accept the bond and may not require:

1. An additional security deposit from the tenant during the lease term; or

2. A surety bond or a security deposit from the tenant that, in addition to the existing surety bond, exceeds two months’ rent at any lease renewal.