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Interest on Last Month's Rent

Hi,

My landlord took a Security Deposit ($2000+) and Last Month's Rent ($2000+). Within 30 days after tenancy ended he returned a portion of the Security Deposit (less "damages") and also gave me "interest" of roughly 7 dollars. The letter did not specify whether interest was on last months rent or security deposit. I plan on requesting the difference between the amount returned and the amount i paid because he did not follow statutory guidelines (never received bank account info for security deposit, or notice of interest earned after one year, and didnt swear to list of damages under pains of purjury, and deducted for normal wear and tear. On to my question:

Mass Law states that Landlord needs to pay 5% or such lesser amount as he gets from the Bank. Due to the vagueness of the term "Bank" I am having trouble with determining how much interest to demand on this amount and I have not seen the questions I list below answered anywhere else so I would appreciate input

My Questions:

(1) With respect to Last Month's Rent, if Landlord put last months rent in a personal checking account that paid 0% interest, does that mean I am entitled to 0% or 5%? Can he say "such lesser amount as received by bank" is 0% because the bank paid him 0% or does "Bank" within the context of 186 15(b) only cover instances where the Last Month's Rent is escrowed in the same account as the Security Deposit?

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Well . . . the landlord is supposed to keep the security deposit in a separate interest bearing account, usually some kind of trust account, that is not intermingled with his/her personal funds. However, those accounts often pay less than 5%.  IN that case, the landlord only need pay the amount of interest he collected during the year.  The landlord is not required to keep the last month's rent in such an account, but is required to pay 5% interest on the money.  For more information or to post a question, visit our MA Tenant Law Discussion Forum.

 



Hello, I don't believe this question was fully addressed and I would like to get more clarification on it. I am in a similar situation where I requested my interest earned over 2 years on my last month's rent deposit and my landlord stated they kept the deposit in an account that does not earn any interest. Therefore, they believe they do not owe me anything. First of all, are they allowed to keep it in an account that doesn't earn any interest? I have not heard of any type of savings or secured account that does not earn interest.

My guess is that my landlord either didn't keep it in account at all, or kept it in a personal checking account. I say this because they have done some some things I don't agree with, and they also did not send me a statement of where it would be kept at the time of the deposit.

So two questions really: 1) a. Am I entitled to any interest even though they are claiming there was none? b. are they allowed to keep it in a non-interest bearing account?
and 2) Can/should I file a complaint? I honestly feel like there is a lot of underlying bad practices in place with this landlord and they could be doing this to other residents as well.

For the record I am already not happy with this landlord because they claimed we were out of balance and I found a check they had cashed but not recorded for about a year and a half ago. It's been like a second job these past two weeks, on top of my move.


Here are the two relevant portions Massachusetts General Laws Chapter 186, Section 15B, with my emphasis:
 
[L]essor of residential real property who holds a security deposit pursuant to this section for a period of one year or longer from the commencement of the term of the tenancy shall, beginning with the first day of the tenancy, pay interest at the rate of five per cent per year, or other such lesser amount of interest as has been received from the bank where the deposit has been held payable to the tenant at the end of each year of the tenancy. Such interest shall be paid over to the tenant each year as provided in this clause, provided, however, that in the event that the tenancy is terminated before the anniversary date of the tenancy, the tenant shall receive all accrued interest within thirty days[.]

Any lessor or his agent who receives said rent in advance for the last month of tenancy shall, beginning with the first day of tenancy, pay interest at the rate of five per cent per year or other such lesser amount of interest as has been received from the bank where the deposit has been held. Such interest shall be paid over to the tenant each year as provided in this clause; provided, however, that in the event that the tenancy is terminated before the anniversary date of such tenancy, the tenant shall receive all accrued interest within thirty days of such termination. Interest shall not accrue for the last month for which rent was paid in advance. At the end of each year of tenancy, such lessor shall give or send to the tenant from whom rent in advance was collected a statement which shall indicate the amount payable by such lessor to the tenant. The lessor shall at the same time give or send to such tenant the interest which is due or shall notify the tenant that he may deduct the interest from the next rental payment of such tenant. If, after thirty days from the end of each year of the tenancy, the tenant has not received said interest due or said notice to deduct the interest from the next rental payment, the tenant may deduct from his next rent payment the interest due.
 
But I think you are correct that the security deposit must be kept in an interest bearing account.  See Massachusetts General Laws Chapter 186, Section 16B:
 
(3) (a) Any security deposit received by such lessor shall be held in a separate, interest-bearing account in a bank, located within the commonwealth under such terms as will place such deposit beyond the claim of creditors of the lessor, including a foreclosing mortgagee or trustee in bankruptcy, and as will provide for its transfer to a subsequent owner of said property. A receipt shall be given to the tenant within thirty days after such deposit is received by the lessor which receipt shall indicate the name and location of the bank in which the security deposit has been deposited and the amount and account number of said deposit. Failure to comply with this paragraph shall entitle the tenant to immediate return of the security deposit.
 
So, there must always be at least some interest to be paid by the landlord on the security deposit, assuming the tenancy lasts at least one year.
 


First, you must realize that there is a distinction between last month’s rent due and a security deposit. As your question addresses the issue of last month’s rent, I will limit my response to the same. With regard to last months rent, M.G.L. c. 186 Sec. 15B, Section 2(a) provides in material part, that:
“Any Lessor or his agent who receives said rent in advance of last month of
tenancy shall, beginning with the first day of tenancy, pay interest at the rate of
five per cent per year or other such lessor amount of interest as has been received from the bank where the deposit has been held. Such interest shall be paid over to the tenant each year as provide in this clause………”

There is no requirement that the last month’s rent be put in a separate interest bearing account. If the landlord does not put the last month’s rent in an account, he would owe his tenant 5% annually. If the landlord put the money in a bank and received only 3% interest, he would only owe you 3% annually on your last month’s rent. For example, if your landlord had a last month’s rent of $1,200.00 and he did not deposit it in a bank, the landlord would owe you $60.00 at the end of the year. You said your landlord advised you that he had the last month’s rent in an account that did not pay interest. This sounds highly suspect to me and I would request from him a copy of the bank records on the same.

Finally, on the issue of whether to file a complaint or not, the answer is that it really depends. Usually, the amount of interest owed is very small compared to the cost of filing a complaint and hiring an attorney to pursue to the same. In the end you may get your interest back, but be stuck with a bill that is much larger than your award. You should take this into consideration before deciding to pursue this matter or consider filing a small claims case where you represent yourself. Also, if you are still residing at the apartment, M.G.L. c. 186 Sec 15B provides that:
“If, after thirty days from the end of each year of the tenancy, the tenant has
not received said interest due or said notice to deduct the interest from the
next rental payment, the tenant may deduct from his next rent payment the
interest due.”

Accordingly, you can deduct the interest from one of your rent payments as outlined above.

You should also realize that M.G.L. c. 186 Sec 15B has a built in penalty provision at Section 2(a) which states, in material part, that :
“If the lessor fails to pay any interest to which the tenant is then entitled
within thirty days after the termination of the tenancy, the tenant upon proof
of the same in an action against the lessor shall be awarded damages in an
amount equal to three times the amount of interest to which the tenant is
entitled, together with court costs and reasonable attorney fees.”

If your landlord fails to pay you your interest within 30 days of the termination of your tenancy, you may be entitled to three time the amount of your interest, court costs and reasonable attorney fees. In that situation, you might consider filing suit because of the penalty provision in M.G.L. c. 186 Sec. 15B.

Goldman & Pease, LLC
160 Gould Street
Needham, MA 02494
www.goldmanpease.com


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