The Maryland Appellate Court issued a new opinion on security deposits in a landlord-tenant situation This post discusses Maryland security deposit law and this new case.
Maryland Security Deposit Law
Maryland security deposit law is a set of rules and regulations that govern the handling of security deposits by landlords in the state of Maryland. It sets out the conditions under which a landlord may collect a security deposit from a tenant, how the deposit must be handled and maintained, and the conditions under which the deposit may be returned to the tenant at the end of the tenancy. This law also sets out the maximum amount that a landlord may charge for a security deposit, which is typically one or two months’ rent.
Specifically, security deposits are regulated by Real Prop. § 8-203. According to the law, a security deposit is defined as “any payment of money, including payment of the last month’s rent in advance of the time it is due, given to a landlord by a tenant in order to protect the landlord against nonpayment of rent, damage due to breach of lease, or damage to the leased premises, common areas, major appliances, and furnishings.” (Real Prop. § 8-203(a)(3)).
The amount of the security deposit is limited by the law. A landlord is not allowed to ask for more than two months’ worth of rent as a security deposit (Real Prop. § 8-203(b)(1)). If a landlord charges more than that, the tenant can sue and may be able to recover three times the extra amount plus attorney fees (Real Prop. § 8-203(b)(2)-(3)).
The Maryland security deposit law is designed to protect the rights of tenants and landlords and to ensure that security deposits are handled fairly and transparently. It provides a framework for resolving disputes between landlords and tenants over the return of security deposits, and helps to prevent awful misunderstandings and disputes over the handling of security deposits that tend to get heated.
If a landlord violates the provisions of the Maryland security deposit law, a tenant may be entitled to sue the landlord for damages, including the return of the security deposit, compensation for any harm suffered as a result of the violation, and attorney’s fees.
Cerrato v. Garner
The Garners, who reside in Alabama, own a single-family home in West River, Maryland called “the Property.” In July 2019, they listed the Property for rent through a real estate broker named Samson Properties, LLC. A man named Damien Woodson acted as the listing agent.
During an open house, Jose Ortiz and Denise Cintron offered to rent the Property for one year for $2,500 per month and to pay all the rent in advance. The Garners accepted the offer and a lease agreement was made. The lease stated that the rent payments would be $2,500 per month and that the security deposit was $2,500.
On July 31, 2019, Denise delivered a check for $5,000 to Samson, which included the first month’s rent and the security deposit. On August 8, 2019, Denise transferred $25,000 to Samson, which covered 10 months of rent. However, Jose and Denise withheld one month’s rent because of a dispute about the condition of the Property.
The lease agreement stated that it was the full and final agreement between the parties and that there were no other conditions not mentioned in the lease.
On October 4, 2019, Mr. Ortiz filed a complaint against the Garners in the District Court. In his complaint, he claimed that the Garners had violated the security deposit law in Maryland by accepting more than two months’ rent as a security deposit. The case was then transferred to the circuit court. The Garners filed a counterclaim for breach of contract and a third-party complaint against Samson and Mr. Woodson. The court heard arguments from both sides and ruled in favor of the Garners, Samson, and Mr. Woodson. The remaining claims were dismissed without prejudice.
After living in the property for four months, Ortiz filed a lawsuit against the Garners, claiming that they violated a law that prohibits excessive security deposits. The Circuit Court has ruled in favor of the Garners in regards to Count I of the complaint filed by Mr. Ortiz.
However, the court determined that because the advance payment was offered voluntarily by Mr. Ortiz and not imposed by the Garners, it did not qualify as a security deposit and was not in violation of the statute. The court also granted summary judgment in favor of the Garners on Counts II, III, and IV of the complaint, while Count V was dismissed without prejudice by agreement of the parties. The Circuit Court’s ruling was based on its interpretation of Real Prop. § 8-203 as a remedial statute, as well as its analysis of the plain language of the statute and the legislative purpose behind it.
The tenants were obviously pretty angry about the whole thing because they took their appeal all the way to the Maryland Appellate Court. Mr. Ortiz argues that the circuit court made a mistake by granting summary judgment on Count I because the Garners were not allowed to accept $22,500 in advance of rent due, whether labeled as rent or security deposit, under Real Prop. § 8-203.
He believes that the definition of a security deposit, including payment made in advance of time due, covers his advance payment of 10 months’ rent to protect the Garners against non-payment of rent. Ortiz argues that the fact that he and the Garners agreed to the advance payment is not relevant because every lease agreement reaches a meeting of the minds. Mr. Ortiz had claimed that the Garners violated Real Prop. § 8-203 by accepting an advance payment of $22,500, which he believed was a security deposit and thus limited to the equivalent of two months’ rent. He also argues that since Real Prop. § 8-203(b) is a remedial statute enacted to protect tenants, any ambiguity in the statute should be interpreted in his favor.
The Garners counter that a tenant’s unilateral offer to pay rent in advance does not violate Real Prop. 8-203(b). They argue that Ortiz’s purpose for offering the advance rent was to reduce the monthly rental amount, not to protect the Garners against non-payment, and therefore it is not a security deposit. They also argue that even if it could be considered a security deposit, because it was not imposed by the Garners, accepting it did not violate Real Prop. § 8-203(b)(1).
After considering the legislative purpose, the ends to be accomplished, and the evils to be remedied by Real Prop. § 8-203(b), the court determined that the Garners did not impose or charge an excessive security deposit. The court noted that the statute limits the amount that a landlord may impose as a security deposit to the equivalent of two months’ rent and is intended to prevent overreach by landlords with unequal bargaining power. The court also noted that the statute defines a security deposit as a payment made to protect the landlord against certain risks of loss, including non-payment of rent.
The court determined that the payment made by Mr. Ortiz was a voluntary payment and not a security deposit as it was not imposed or demanded by the Garners. The court also noted that the Lease between Mr. Ortiz and the Garners required a $2,500 security deposit and that the Lease did not obligate Mr. Ortiz to make the rent payment in advance.
Finally, the court affirmed the circuit court’s decision to grant summary judgment on Count I and held that the Garners did not violate Real Prop. § 8-203(b) by accepting the advance payment of money from Mr. Ortiz.
Maryland Landlord Tenant Case Law
- Pak v. Hoang, 378 Md. 315, 326-28 (2003): The Maryland Supreme Court held that Real Prop. § 8-203(e)(4) is a remedial statute because it permits an award of treble damages if a landlord fails to return all or part of a security deposit within 45 days without a reasonable basis. The court construed the statute in the is Montgomery County landlord-tenant dispute broadly to effectuate its remedial purpose and emphasized that a tenant would be significantly disadvantaged if a security deposit was excessive and improperly withheld. So this law was drafted to put real pressure on landlords to pay it straight when it comes to security depositions.
- Camer v. Lupinacci, 96 Md. App. 118 (1993). This was a Prince George’s County case in which tenants sued their landlord for breach of Real Prop. § 8-203(b) of the Maryland Real Property Code. The tenants alleged that the landlord had demanded three months’ rent as a security deposit, which was an excess of $900, and had not provided a receipt for it. The circuit court granted summary judgment in favor of the tenants and awarded them $1,800 in damages. On appeal, the court affirmed the judgment, explaining that the landlord admitted to collecting a security deposit equivalent to three months’ rent, making the statutory violation beyond dispute. The court also rejected the landlord’s argument that the tenants were obligated to prove actual damages occasioned by the violation of Real Prop. § 8-203(b), reasoning that the statute included no such requirement.