Pennsylvania security deposit laws for landlords: two months, then one, and interest after year two
Pennsylvania lets a landlord hold up to two months' rent as a deposit during the first year of a lease and one month's rent from the second year on. Deposits over $100 go in an escrow account at a regulated bank, interest starts after the second anniversary with the landlord keeping 1% a year, and you must send a written list of damages within 30 days or lose the right to withhold anything. The rules are in sections 511.1 to 512 of the Landlord and Tenant Act of 1951.
How does the Pennsylvania cap change over a lease?
Section 511.1(a) says no landlord may require more than two months' rent in escrow for damages and rent default during the first year of any lease. Under 511.1(b), in the second and later years, or in a renewal of the original lease, the amount required may not exceed one month's rent. So a deposit that was fine in year one must be brought down, or the excess handled, when the lease renews.
Section 511.1(d) adds a rule for long tenancies: once a tenant has been in possession five years or more, rent increases do not require a matching increase in the deposit. Subsection (f) makes any waiver by the tenant void. The section applies only to residential property.
Example a made-up apartment rents for $1,100 a month. In year one the most you may require is $2,200. When the tenant renews for year two, the most you may require is $1,100, so a landlord who holds $2,200 should refund or credit the extra $1,100. If the tenant stays six years and the rent goes to $1,300, the deposit does not need to rise.
Where does the deposit go, and when does interest start?
Section 511.2(a) says funds over $100 deposited to secure a rental agreement must be held in an escrow account of an institution regulated by the Federal Reserve Board, the Federal Home Loan Bank Board, the Comptroller of the Currency or the Pennsylvania Department of Banking. Whenever funds go into an escrow account, interest bearing or not, you must notify each tenant in writing of the bank's name and address and the amount deposited. Section 511.3 allows a guarantee bond from an authorized bonding company instead of escrowing.
When the money is in an interest bearing escrow savings account, you may keep 1% a year of the deposit as administrative expense in lieu of other custodial costs. The balance of the interest belongs to the tenant and is paid annually on the lease anniversary. Under 511.2(c), this applies only after the second anniversary of the deposit.
Example a made-up $1,100 deposit sits in an interest bearing escrow account paying 2% a year, $22. After the second anniversary, the landlord keeps 1% of the deposit, $11, and owes the tenant the other $11 at each lease anniversary. In the first two years no interest is owed under this section.
What must I do within 30 days of the lease ending?
Section 512(a) requires you, within thirty days of termination of the lease or surrender and acceptance of the premises, whichever occurs first, to give the tenant a written list of any damages to the premises you claim the tenant is liable for. The list comes with payment of the difference between the escrowed sum, including any unpaid interest, and the actual damages. You may still refuse to return the fund for nonpayment of rent or breach of another lease condition.
The burden of proof for actual damages is on the landlord (512(c)). That makes photos, invoices and a signed move-in condition report the best protection you have.
What does a mistake cost?
There are two penalties. Under 512(b), a landlord who fails to provide the written list within thirty days forfeits all rights to withhold any portion of the escrow, including interest, and to bring suit against the tenant for damages to the premises. Under 512(c), a landlord who fails to pay the difference within thirty days is liable in assumpsit to double the amount by which the escrowed sum exceeds the actual damages caused by the tenant, as determined by a court.
Example a made-up landlord holds $1,100, finds $300 of real damage and sends neither a list nor a check within 30 days. The amount by which the deposit exceeds actual damages is $800. Double that is $1,600, instead of the $800 the tenant would have received on time. The forfeiture rule also bars the $300 claim.
Section 512(e) relieves the landlord from liability if the tenant fails to give a new address in writing upon termination or surrender. As with any deposit rule, ask for the address in your move-out letter and keep a copy.
How DoorKeeping handles it
Because DoorKeeping gives each property its own books, you can see each tenant's deposit as its own balance and spot the leases that renew into the one month cap. E-signed leases are stored with the property documents so the lease dates are in one place. DoorKeeping never holds the deposit, any step with money waits for your one tap, and it gives no legal advice.
Sources
Questions
- What is the maximum security deposit in Pennsylvania?
- Two months' rent during the first year of a lease, and one month's rent from the second year on or in a renewal (Act of 1951, 511.1).
- How long does a Pennsylvania landlord have to return a deposit?
- Thirty days after the lease ends or the premises are surrendered and accepted, with a written list of claimed damages and payment of the difference.
- Does a Pennsylvania landlord owe interest?
- After the second anniversary of the deposit, yes: the interest on an interest bearing escrow account less 1% a year the landlord keeps, paid annually on the lease anniversary.
- What if I miss the 30 day deadline in Pennsylvania?
- You forfeit the right to withhold any of the deposit and to sue for damages, and you can owe double the amount that exceeded actual damages.