First/Last/Security - What to Charge?

Question

Hello,

I am reading into what is allowed by the State of Massachusetts for charges such as first/last/security...

I understand that:

1. I can collect a security deposit = to rent

2. This security deposit needs to be placed into a separate interest bearing account

3. I can collect first and last month's rent

However, are there any special rules on what happens with the first/last after it is collected? Can that go straight into my personal checking account/be used for an expense I've been waiting on? Or does it need to be treated in a specific way like the security deposit.

I am thinking of only taking First and Security Deposit and disregarding the Last Month's Rent....any thoughts would be appreciated!

Account Closed · Answer

@Rich Ng I was debating this with a friend the other day - I have found nothing in the state laws or anywhere specifically that has said that you cannot charge a monthly fee for having a pet. I know you can't charge extra security deposit for it, but I have not found evidence that you can't charge a "pet fee" monthly.

I used to live in a commercial building outside of Boston that allowed pets, but charged $75 a month to have them in the apartment. I would imagine if the big guys are doing it then the smaller landlords could as well.

Rich N. · Answer

@Steve DellaPelle

Gosh, where do we begin?  lol

1. You can only accept lock/key, first, last and sec dep and no other fees. Not even a pet fee.2. First month - you can deposit into your account and use.3. Last month - must provide interest too ( I usually get lazy and put it in the sec dep acct). Can not exceed first month total.4. sec dep account - must provide interest, separate MA account and interest paid out annually. Can not exceed first month.5. When signing lease and exchanging the funds make sure to perform the walkthrough and provide a "condition of statement" for the unit.6. when they leave you have 14 or 30 days (check law) to return the sec dep escrow with a detail list of all expenses and copies of invoices.7. You can not use the sec dep for the last month rent unless the courts says so.

Seeing as it takes forever to evict a tenant, I recommend getting last and sec dep or at least last and 1/2 sec dep.

Steve Bracero · Answer

@Steve DellaPelle

You can collect first, last, security, if you would like-

I would check and see what your direct area is collecting.

If rents are high- then collecting all three may be a lot for tenants upfront....

Security deposits are very specific to handle. You could go to Sauntaunder and have them set up a landlord account.

Filipe Pereira · Answer

You definitely know your stuff, Rich. Hats off to you. Connecticut has very similar (if not the same?) laws regarding security deposits. They have to be in separate escrow accounts, tied to the SSN of the tenant, for exactly the reason you mentioned - it is now protected from my creditors. How nice of CT to have the tenant's best interest in mind. Unfortunately, I'd imagine MOST landlords here don't go to these measures to ensure that the tenants' money is actually safe. Again, well done. You are very well studied in this area.

Filipe

Rich N. · Answer

@Ned Jackson

As @Steve DellaPelle stated but also, the account is suppose to be a Massachusetts bank account.  Also, by having separate escrow accounts using their SS#, they will get the correct interest and they will have to "pay" the tax on the interest ( I know its a little, but over $10 total and its a 1099 to you).

One last thing, by setting it up as a LL/tenant account using their SS#, it is protected from your creditors.

Thomas S. · Answer

Collecting first, last and security is a valuable screening tool. If you screening standards are high you collect it all.

Steve DellaPelle · Answer

@Ned Jackson Different laws in Massachusetts....and the interest DOES need to be paid out to the tenant annually.

Moshe H. · Answer

FWIW, my MA attorney has advised me over and over again not to take security deposits... because if your tenant fights in court it will most likely end up in housing court and there you will not win, and if you have been found to "misappropriate" even a few dollars of the sec dep, you can be fined triple damages on the whole amount of the sec dep.

Rich N. · Answer

@Ned Jackson

Wait, how can that be...CA is crazy friendly tenant as MA ?  You are so lucky.  We screw it up over here and even miss something like the condition statement and it could be triple damages.

The market is still high warm to hot and even lower income areas with 3 bedrooms can be 1300-1500 and better class areas still get 2500-3500. So triple these numbers and ouch if thy get the right judge.

Rich N. · Answer

Mike,  There is no specific law on the extra rental amount that I know of, but it opens a bunch of potential headaches.  If a tenant questions you on the extra rental and you mistakenly respond back something like its to cover the potential damages, they will say that is covered under the sec dep already (hence illegal to charge more than the 1 month) or at move out, they can say, well there is no damage, so you owe me back everyone of those months.

Another way a tenant could go after you later in court is to say you charged for a pet rental when by law you can only go after F,L, sec dep and key.....our state!

In my mind, I would just added it to the actual rental amount and this would even allow you to charge a higher sec dep amount (equaling the month).  So few places accept pets, so if one place charge $2200 and you charge $2250 with the rental listing stating you accept a pet...they will love you for it !

Also, trying to avoid any chance of discrimination cases, why have someone come with a service dog and then say so you are charging me more? We are in a tenant friendly state.

First/Last/Security - What to Charge?

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