Security Deposit Security Deposit Limited to 2 months ? receiving 6 month Security Deposit + Last mont

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loutama

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Security Deposit Limited to 2 months ? receiving 6 month Security Deposit + Last month rent

Maryland Landlord Tenant Act
I have a tenant (potential tenant) with poor application and poor credit and poor rental verification, poor (unverifiable income references and employment references) so basically what ever is the application you can consider YOU DO NOT HAVE AN APPLICATION –

The credit reports show the Tenant had previous filed bankruptcy.

In order to offset, the 'weak' application, The Tenant offered a 6 month Security Deposit + Last month rent ($3,700 x 7 = $25,900), which I accepted and we signed a 3 year residential lease on a single family house. The deposit is paid in installments over the next 6 months. Tenant paid already 2 months security deposit and will pay 1 more month Security Deposit before moving in along with the first month rent.

The next day, I started reading the Maryland Landlord Tenant Act and discovered that I am only entitled to 2 months Security Deposit (including a last month rent) and that the Tenant can sue me the Landlord for 3 times the amount of Security Deposit for having gotten more Security Deposit then what is permitted by Law (Maryland Landlord Tenant Act). Is my reading of the Law correct?

If so how can I resolve this? Should I just not accept to receive the Security Deposit and last month rent that are in excess of the 2 months allowed by law? But then I got the lease signed already and I end up with a very 'risky' tenant without the extra Security of a Security Deposit in excess of the 2 months permitted by Law.

I can not even call the additional monies pre-paid rent because this would still fall in the 2 months limitation for both Security Deposit and Pre-paid rent.

I am considering calling it pet deposit (tenant has 2 dogs) but a pet deposit can not be a large amount, so the max I could put under a 'pet deposit' I would think is about $1,000. So this not a solution the Deposit being $25,900 ( 7 months ).

The risk for me is great to be sued for 3 times that amount by the Tenant and the risk is also great for having now a Tenant with poor payment record, bankruptcy and poor and unverifiable data in the rental application. The tenant has not moved in yet, he will later, next month.

I am also wondering if this possibly a set up by the Tenant, in order for him to sue me for 3 times the amount of the deposit. (may be he is aware of this provision in the Maryland Landlord Tenant Act) and I was not. I am being suspicious because, it seems a 'too good to be true' scenario where a tenant comes and offers that much security deposit. (wondering what could it be hiding besides the poor application qualifications of the tenant)

My reading of the Law is correct?
Any solutions? For my situation. Any ideas? Any suggestions?


Maryland Landlord Tenant Act
§ 8-203
(a)
(3) "Security deposit" means any payment of money, including payment of the last month's rent in advance of the time it is due,

Section § 8-203
(b)
(1) A landlord may not impose a security deposit in excess of the equivalent of two months' rent per dwelling unit, regardless of the number of tenants.
(2) If a landlord charges more than the equivalent of two months' rent per dwelling unit as a security deposit, the tenant may recover up to threefold the extra amount charged, plus reasonable attorney's fees.
(3) An action under this section may be brought at any time during the tenancy or within two years after its termination.
 
Don't rent to this deadbeat.

Of course it is a set up.

Deadbeats like this know all the angles and work them well.
 
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At this point you haven't taken any money from the tenant that is in excess of laws relating to security deposits. I don't know what state you're in but you might consider this agreement made under a "mutual mistake of fact" and thus voidable by either party.

Chances are that Army Judge is right - a long time deadbeat will know all the angles. I did a little work in landlord-tenant law and I can tell you that there were countless numbers of deadbeat tenants who scouted the neighborhoods for illegal rentals to take advantage of not having to pay rent and the incredible difficulty the landlord faces of using the system to evict them. In doing so, the landlord essentially concedes to paying whatever fines are levied by the state for the illegal rental. They hope to obtain a pay-off from the landlord to leave so as to avoid court.

If the tenant is paying you 6-8 months of rent for a three year rental, even if legal, I wouldn't consider this "too good to be true." Unless the tenant has a job and way to pay the rent, you're basically in a hole shortly after the money would have run out. If his answers aren't good you should ask yourself why you want to rent to someone who will likely be trouble. If you really feel the need to rent to him, you're better off renting for a year and having first and last month's rent for security with perhaps some amount placed into escrow for the rent - I'm not sure whether that would run afoul of security deposit laws since you won't be physically in custody of the money (and I'm thinking outside of the box.)
 
(this is Loutama, I had posted this Security Deposit Limited to 2 months ? receiving 6 month Security Deposit + Last month rent)

I am in Maryland State. And I was surprised when I was reading up by curiosity on the Maryland Landlord – Tenant Act as I was looking for some info about Security Deposit deductions I plan to do on my other tenant , the other occupant that is vacating the property so this new tenant (the one with the 7 months Security Deposit moves in).
Yes I agree and you are right, 7 months for a poor rental application and a 3 year lease is not so 'too good to be true'…. I am not sure why the Maryland Law forbids this, I had never thought there would be a limitation, especially if it is offered by the tenant / tenant applicant and not imposed by the landlord.
Your idea to reduce the lease to one year is a good one, this way I limited my 'exposure' although from the first day the Tenant moves in and things potentially do not go well, I will have to proceed with an eviction notice and eviction procedure which would be the same with a one year lease or a longer term lease, I am still not committed to the tenant beyond the eviction procedure (may be 3 months)
I like your idea of placing the amount in escrow ! it is an excellent one, I will look into it… this could be the solution.
It reminds me that in France, there is the possibility to have the Tenant get a Bank Guarantee. Which is the best scenario for the Landlord. The Tenant's bank guarantees the full year of rents to the Landlord in case of Tenant 's Default or damages to the property and this only costs a nominal fee of about $100 per month to the Tenant.
Also in France you can subscribe to Insurance for Rental Incomes, so you basically on your end in addition to the Tenant Bank Guarantee can subscribe to the rental income insurance (costs about 8% of the rents) and the Insurance will cover you the rents and will pay them if the Tenant does not pay them.
Yes, I should ask myself the question why I would rent to this tenant… well, here is the situation, the property rented for $5,000 before the Real Estate downfall, last Tenant paid $3,400 / month, I have one applicant with a good government job but she would only pay $3,000 and she does not seem an easy person to get along with, but may be she would have been a better choice. So I got 'greedy' and interested in the $3,700 + $125 for pets and the 7 months security deposit… not knowing there would be a law limiting the deposit ! (had never heard of this in 30 years of real estate renting and investing).
The property is hard to rent, it is in an area that is not in high demand and an area where the properties typically would rent at the most for $2,200 but this one should rent for more because it is on the water front and it is more costly (property taxes alone are about 3 to 5 times more , of other nearby properties and it is about $1,000 per month so renting at $2,200 to attack a higher traffic of potential Tenant is not really an option for me).
Now I lost the Tenant at $3,000 because I turned the tenant's application down.
Lucky I may have caught this risk in time.
I am wondering if the Tenant is even aware of this Maryland Law Limiting the Deposit and if it is a set up or not. But even if it is not a set up, I am likely in the course of the 3 years or even 1 year to have a dispute with the Tenant, particularly over security deposit return without deductions. AND then the Tenant will find out his right to sew me for 3 times the amount + attorneys fees , even up to 2 years after he moved out.

Loutama
 
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