Maryland Security Deposit Rules: 2-Month Cap & Return Laws

Since Maryland entered the Union on April 28, 1788, it has developed a robust legal framework governing residential tenancies. Today, Maryland enforces some of the strictest security deposit regulations in the country. From hard caps on the maximum amount to strict banking and interest requirements, landlords must adhere perfectly to the Real Property Article (§ 8-203) to avoid severe financial penalties.

Maximum Security Deposit Limit

In Maryland, a landlord generally cannot require a security deposit that exceeds the equivalent of one month's rent per dwelling unit, regardless of the number of tenants. A landlord may impose a security deposit of up to two months' rent only if the tenant qualifies for utility assistance through the Department of Human Services, the lease requires utility payments directly to the landlord, and the parties agree to the amount in writing.

• Any pet deposit is considered part of the total security deposit, meaning the combination of the base deposit and pet deposit cannot exceed the legal maximum.

If a landlord charges more than the permitted amount, the tenant can recover up to three times the extra amount charged, plus reasonable attorney's fees.

Trust Account & Receipt Requirements

Landlords must provide tenants with a written receipt for the security deposit. This receipt must inform the tenant of their right to:

• Receive a written list of all existing damages if they request it via certified mail within 15 days of occupancy.
• Be present during the final move-out inspection if they notify the landlord via certified mail at least 15 days before moving.

Where the money is held: The landlord must maintain all security deposits in federally insured financial institutions that do business in the State. Security deposit accounts must be maintained in branches of financial institutions located within the State of Maryland and must be devoted exclusively to security deposits and bear interest. A security deposit must be deposited into such an account within 30 days of receipt.

Interest Requirements

If the landlord holds a security deposit of $50 or more for at least six months, they must pay interest on that deposit to the tenant.

Under Maryland law, interest accrues at monthly intervals from the day the tenant gives the landlord the security deposit. The interest rate must be the daily U.S. Treasury yield curve rate for one year, as of the first business day of each year, or 1.5% a year, whichever is greater. The interest is not compounded and must be paid to the tenant when the deposit is returned at the end of the tenancy.

The 45-Day Return Deadline

A landlord has 45 days from the termination of the tenancy (which may differ from physical move-out in cases of abandonment or eviction) to return the security deposit, plus any accrued interest, to the tenant's last known address via first-class mail.

If the landlord makes deductions for damages, unpaid rent, or a breach of the lease, they must provide an itemized list of charges along with the remaining balance of the deposit within the same 45-day window.

Penalties for Withholding

If a landlord fails to return the deposit or the itemized list within 45 days, they automatically forfeit the right to withhold any part of the deposit for damages. Furthermore, the tenant may sue the landlord in the District Court of Maryland and recover up to three times the withheld amount, plus attorney's fees.

Staying Compliant Automatically

Calculating the exact U.S. Treasury yield curve rate versus the 1.5% floor for interest on move-out can be an administrative burden. Landager automates this calculation for Maryland properties, ensuring your 45-day return letters include mathematically perfect interest additions and itemized deduction ledgers.

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How Landager Helps

Landager tracks lease terms, payments, and compliance document dates - making it easy to stay compliant with Maryland regulations.

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