Besides rent, a security deposit is also another move-in fee that Pennsylvania tenants usually pay before signing the rental agreement. A security deposit acts as a safety net for landlords by protecting them against financial issues emanating from negligent tenant actions.
The security deposit laws are part of the state’s landlord-tenant laws. As a landlord, you must abide by certain rules when it comes to handling your tenant’s security deposit. If you fail to do so, you risk incurring multiple punitive financial damages.
The following is a basic overview of Pennsylvania’s security deposit laws.
Is there a limit to how much Pennsylvania landlords can ask for as a security deposit?
Yes, there is a limit to how much security deposit a landlord can collect from their Pennsylvania tenants. The limit differs based on the length of a tenancy.
If the lease runs for a year, then you, as the landlord, can collect a maximum of two months rent as a security deposit. If the tenant renews their lease for the second year, then you must collect a maximum deposit of at least one month’s rent. And if the tenant has rented the unit for at least 5 years, then you aren’t required to ask for a security deposit.
Are there rules to storing a tenant’s security deposit?
Yes, a Pennsylvania landlord must adhere to certain rules when it comes to storing a tenant’s security deposit.
If the Pennsylvania security deposit exceeds $100, then a landlord must do either of the following:
- Store it in an escrow account. The account must be in a banking institution regulated by either the Pennsylvania Department of Banking, Comptroller of the Currency, Federal Home Loan Bank Board, or the Federal Reserve Board.
- Place the tenant’s security deposits in an interest-earning account, for leases that are renewed beyond the first 2 years. The accrued interest will belong to the tenant and must be paid to them yearly. A landlord may be entitled to 1 percent of the deposit as an administration fee.
Alternatively, a landlord may also be able to post the tenant’s deposit as a bond. The bonding company must be authorized to do business in the state of Pennsylvania.
Do tenants in Pennsylvania have a right to be notified of receipt of security deposits?
Yes. Once a landlord receives the security deposits from their tenants and stores them in any of the aforementioned ways, they must send the tenant a written notice. In the notice, a landlord must state the following:
- The name and address of the bank where it’s being stored.
- The amount of security deposit that has been deposited.
Can a landlord keep part or all of a tenant’s security deposit in Pennsylvania?
Yes. Landlords have a right to make deductions to a tenant’s deposit for certain reasons. They include:
- Costs of clearing unpaid utilities when a tenant is moving out. When moving out, Pennsylvania tenants are supposed to pay all utility bills in their names. If they fail to do so, the landlord can use the security deposit to cover those expenses.
- Costs of cleaning the unit. Generally speaking, aside from normal wear and tear, a tenant has to leave their rental in the same state they found it. If the unit needs professional cleaning services, then a landlord can deduct that cost from their security deposit.
- Nonpayment of rent. If your Pennsylvania tenant is unpaid rent and no justifiable reason to withhold it, you may be entitled to part or all of their security deposit.
- What’s more, you may also be entitled to the tenant’s deposit in case they cause excessive damage to the rental property. Excessive damage is anything that exceeds normal wear and tear. It negatively impacts the rental’s value, usefulness, or normal function.
What is the purpose of a walk-through inspection?
A walk-through inspection is where both the landlord and tenant inspect the property’s condition before moving out. Generally speaking, it allows the tenant to fix any violations before moving out. However, if they don’t, then you may use part or all of their deposit to fix any issues found that exceed normal wear and tear.
When must you return the tenant’s deposit in Pennsylvania?
If you haven’t made any deductions to the tenant’s deposit, you must return it within 30 days of the tenant moving out.
If you, the landlord, have made deductions, you must still return the remaining portion of the deposit to the tenant within 30 days. If you don’t, you may be liable for paying the tenant up to two times what is owed.
In accordance with Pennsylvania security deposit law, you, the landlord, must also include a written list of the deductions, as well as the approximate repair costs. If you fail to do this, you may forfeit your right to withhold any portion of your tenant’s deposit.
If the tenant doesn’t provide you with his or her new address, then you may not have any liability in regards to returning the deposit.
Can a tenant use their security deposit as last month’s rent?
No, your Pittsburgh, PA tenant cannot use their security deposit to cover last month’s rent. The only exception to this is if both you, the landlord and your tenant have an agreement in writing allowing it.
Are security deposits taxable in the state of Pennsylvania?
Security deposits aren’t taxable until they become the landlord’s property. This occurs when it’s forfeited, applied towards rent payment, or applied to charges allowed under the lease.
It’s important as a Pennsylvania landlord to understand security deposit laws. You must also stay up-to-date on landlord-tenant laws, the legal eviction process, lease or rental agreement law, and any other rental laws.
If you would like help keeping track of these laws or would like assistance managing your rental properties, contact the professionals at DeSantis Property Management!
Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws frequently change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other management needs.