Keeping that Deposit Could Cost You:What landlords need to know about security deposit retention
By Allison A. Economy, Esq.
Landlords collect security deposits to protect themselves from tenants who fail to pay rent or damage the leased premises beyond normal wear and tear. But what happens if the landlord retains that deposit wrongfully or without proper notice to the tenant? According to a recent Law Court decision, it could cost the landlord – a lot.
In April, the Law Court issued a decision in Rousell v. Ashby, 2015 ME 43. In that case, potential tenant Jennifer Roussel gave would-be landlord Sheldon Ashby $2,000 toward her security deposit, but they never signed a lease and Ms. Roussel ended up moving into a different apartment. Ms. Roussel requested a refund of her security deposit, and when Mr. Ashby did not respond, Ms. Roussel filed a complaint against him. The superior court entered default against Mr. Ashby and entered judgment for Ms. Roussel in the amount of $24,628. The Law Court upheld the judgment on appeal.
A $25,000 award based on a $2,000 deposit? It may sound extreme, but there are some very specific statutory requirements related to the retention of deposits. Maine law provides that a landlord must return the full security deposit or provide the tenant with a written statement itemizing the reasons for the retention of the deposit (or any portion thereof) within the time provided in a written lease (not to exceed 30 days) or, in the case of a tenancy at will, within 21 days after the termination of the tenancy or the surrender of the premises, whichever occurs later.
If the landlord fails to provide a written statement or return the security deposit within the specified time, the landlord has forfeited his right to withhold any portion of the security deposit, and the tenant can bring a legal action after giving 7 days notice. If the landlord fails to return the entire security deposit within that 7-day notice period, it is presumed that the landlord is wrongfully retaining the security deposit, and the landlord is liable for double the amount of the deposit wrongfully withheld, plus reasonable attorney’s fees and court costs.
In Rousell v. Ashby, those costs and fees added up quickly, the landlord became liable to pay to the prospective tenant more than ten times the amount he had originally collected from her.