If you are or want to be a landlord in DC you may have a lot of worries about your legal responsibilities. Collecting a security deposit, like everything else in the DC rental business has very specific and technical rules. This post covers the basics of what you need to know.
You can only collect one security deposit, the amount of which is capped
The Rules are clear that you may only collect the security deposit once. (14 DCMR § 308.2.) That means, you can’t use it to pay for a repair or cover unpaid rent during the lease term and then ask the tenant to post a new one. Additionally, the amount you can collect and hold as a security deposit is limited. You may not require a tenant to post in excess of one full months’ rent. (14 DCMR § 308.2) Remember, rent is paid in advance, so, at lease signing, you need to collect the rent for the first month and the security deposit in an amount equal to one (1) month of rent. Only then should you turn over the keys.
Security deposits must be kept in a segregated interest-bearing account
Now that you have the security deposit in hand, there are rules about where you musk keep it. Many landlords make the mistake of simply depositing the security deposit with the rent into their regular bank account. However, this is called ‘co-mingling’ and is not allowed. A security deposit must be deposited into an interest-bearing escrow account that is exclusively for security deposits. (14 DCMR § 308.3) That means if you are a first-time landlord, you have to open a new account for the security deposit. However, if you have more than one rental unit, you are not required to open a new account for each unit. You can put all of your security deposits into one account.
There are disclosure requirements when you collect a security deposit
When you collect a security deposit there are three basic disclosure requirements. First, the conditions of the deposit must be expressly spelled out in the lease. (14 DCMR § 308.6) Second, the landlord must post notice of the bank where it is held. (14 DCMR § 308.7) Finally, the landlord must provide the tenant a copy of the Security Deposit Regulations at the start of the lease. (14 DCMR § 300.1)
My tenant is moving out, now what?
When a tenant gives notice that he or she intends to move-out, the landlord has additional responsibilities to properly handle the security deposit. First, the landlord must give the tenant ten (10) days notice of an inspection which must take place within three (3) days of lease termination. 14 DCMR § 310. Then, within thirty (30) days after lease termination the landlord must provide the tenant with an itemized list of damages and charges against the deposit. 14 DCMR § 309.2. Within 45 days after lease termination the landlord must return the security deposit (or what is left of it) and all interest accrued. (14 DCMR § 309.1)
What happens if a landlord doesn't return the deposit?
The law is very favorable to tenants. If the landlord fails to provide the itemized damages statement, then the entire deposit is refundable. 14 DCMR § 309.3 If the landlord wrongfully withholds the deposit, in some cases, the landlord might be responsible for treble damages, which means three times the amount of the deposit. (14 DCMR § 309.5(1)) Also, if the tenant retains an attorney, the landlord can be on the hook for the tenant’s legal fees. Like everything else involving landlord and tenant relations in the District, security deposit law is technical and deadline driven. It is not something you want to handle without a safety net. If you have questions about handling a security deposit or are engaged in a dispute with a tenant, contact me or use my online scheduler to book a free case evaluation.