While Massachusetts does not require security deposits on rental properties, they are standard practice. The deposit protects property owners by providing a dedicated fund to cover unpaid rent, utility charges, or repairs for damage beyond normal wear and tear. The deposit also incentivizes tenants to maintain the property and fulfill the terms of the lease agreement.
This financial protection comes with state-specific rules. In Massachusetts, regulations limit how much a landlord can collect at move-in, set escrow and banking requirements, set move-out return timelines, and govern property sales or ownership transfers. It also provides guidance on deductions from the deposit for damage beyond normal wear and tear.
Let’s review these guidelines for best practices at your property. 
Move-In Compliance Requirements
Landlords must meet several compliance requirements at move-in to comply with Massachusetts Security Deposit Laws.
Upfront Collection Limits
At the start of a tenancy, a landlord may collect first month’s rent, last month’s rent, and a security deposit capped at one month’s rent. There may also be a reasonable fee for a new lock and key included in the amount.
Escrow & Bank Requirements
Landlords or property management companies must hold that deposit in an interest-bearing escrow account at a bank located in Massachusetts. This must be done within 30 days of receiving the deposit. There is no co-mingling for this account, meaning it must be put in a separate account to protect the deposit from creditors.
Additionally, once the deposit is made, the tenant must be informed of the bank’s name and address, specific account number, and the amount deposited.
Condition Statement
Within 30 days of tenancy, a landlord or property management company must provide the tenant with written information about the unit’s condition, including any existing damage. This notice will come in handy at the end of the lease when a tenant is asking for the deposit back.
Tenants have 15 days to respond to the written notice and either sign off on the conditions or create a list of detailed damages not included in the initial list. Pictures can be used at this point as well. 
Ongoing Compliance: Annual Interest Obligations
During the time of tenancy, the landlord must pay the tenant the annual 5% interest or apply a credit at the 12-month mark.
Move-Out Compliance
At move-out, a landlord or property management company has 30 days to return the security deposit or provide an itemized list of deductions. These deductions could be for several reasons, including missed rent payments or physical damage beyond reasonable wear and tear. Each deduction must be backed by itemized receipts, estimates, and a sworn statement signed under the pains and penalties of perjury.
Property Sales & Ownership Transfers
If, during the time of tenancy, the property is sold or transferred to new ownership, the seller must transfer all deposit funds (and accrued interest) to the new owner within 5 days of closing.
Navigating property management regulations, including security deposit compliance and laws, takes a knowledgeable and proactive team. At Thayer & Associates, we specialize in helping property owners stay fully compliant.
For more information or personalized assistance with your property management needs, contact Thayer & Associates today to learn how our experienced team can support you.