Q: Can you clarify the meaning of the Maximum Security Deposit from the Renters’ Rights and Stabilization Act of 2024?

A: The Renters’ Rights and Stabilization Act of 2024 brings significant changes to landlord-tenant laws, including a notable reduction in the maximum-security deposit a landlord can require from a tenant. Previously, Maryland law permitted landlords to demand

a security deposit of up to two months’ rent. The new law, however, lowers this cap to just one month’s rent. Specifically, Section 8-203 of the Real Property Article, Annotated Code of Maryland now states:

“(b) (1) Except as provided in paragraph (2) of this subsection, A landlord may not impose a security deposit in excess of the equivalent of 1 month’s rent per dwelling unit, regardless of the number of tenants.

(2) A landlord may impose a security deposit in an amount equivalent to up to 2 months’ rent if:

(i) the tenant is eligible and has qualified for utility assistance through the department of human services;

(ii) the lease agreement requires that the tenant make payments for utility services directly to the landlord; and

(iii) the tenant and landlord agree in writing to the amount of the security deposit.”

Understanding this new one month’s rent restriction is important but so is understanding what is considered a “security deposit”. Maryland law defines a security deposit 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.” In short, a security deposit is an amount of money that the landlord can use to protect themselves from damages caused by the tenant. There is a common misconception that charges such as a “pet deposit” are different than a security deposit. The landlord charges a “pet deposit” to protect themselves from possible damages to the property that are caused by the pet. This mirrors the definition of a security deposit, thus, a “pet deposit” is considered a security deposit. Therefore, after October 1, 2024, a landlord will violate the new security deposit law if they charge the tenant a security deposit equivalent to one month’s rent plus an additional “pet deposit.”

On a separate note, the Renters’ Rights and Stabilization Act of 2024 does not require landlords to retroactively adjust security deposits for leases that were established before the law took effect. Similarly, lease renewals or extensions done by an addendum to the original lease that is either about to expire or has already converted to a month-to-month lease are considered an extension or modification of the existing lease. Therefore, a new lease is not created meaning the landlord does not have to return any portion of the security deposit that is greater than one month’s rent. However, the one-month security deposit restriction will apply to new leases created after October 1, 2024, or renewals done by a completely new lease agreement.