Landlords in Pennsylvania have the right to ask their prospective tenants for a security deposit when renting out their properties. This deposit helps you to be protected from potential financial issues that may result from your tenant’s negligent actions. Such actions could include:
- Damage exceeding normal wear and tear.
- Unpaid utility bills are left at the end of the tenancy.
- Costs of cleaning the unit.
- Early lease termination without a just cause.
- Unsettled rent payments.
But Pennsylvania laws require that you abide by certain rules when dealing with the security deposit. They are as follows.
Maximum Deposit Limits
Pennsylvania law limits the value landlords can charge their tenants as a security deposit and the most you can charge is 2 months’ rent.
There are only two exceptions under this rule: tenants who renew their lease after the first year. In such cases, you can require that the tenant pay a deposit equal to one month’s rent. For lease renewals spanning over 5 years, you must not raise the tenant’s security deposit even if the rent has gone up.
Pet Deposits
In the state of Pennsylvania, you can ask for an additional deposit if you allow pets. But this must not apply to tenants who use service animals. According to the Fair Housing Act, mentally or physically disabled tenants are entitled to full and equal housing.
Where to Store the Deposit
If the tenant’s security deposit exceeds $100, the security deposit laws dictate the account it is stored in.
The account can either earn interest or not, but it must be stored in a financial institution that is regulated by either the Federal Home Loan Bank Board, the Federal Reserve Board, the Pennsylvania Department of Banking, or the Comptroller of the Currency.
If the account is interest-bearing, you must notify of the exact amount stored in the account, as well as the banking institution’s name and address. The other option is posting a bond for the full security deposit amount. The surety must have the authorization to operate in the state of Pennsylvania.
Legitimate Deductions
The following are the only allowable reasons for security deposit deductions, as per Pennsylvania security deposit law:
- Unpaid rent
- Lease violation by a tenant
- Cost of damage exceeding normal wear and tear
Normal wear and tear refer to the normal and natural degradation that occurs to a property over time. Examples of such issues include faded wall paint, loose door handles, gently worn carpets, dirty grout, and stained bath fixtures.
You can only hold your tenant liable for damage exceeding normal wear and tear. Examples of these damages include holes in the wall, broken tiles, pet damage, missing fixtures, and broken windows.
Returning the Security Deposit
As per the landlord-tenant laws, once your tenant vacates their rental premises, you’ll have 30 days to return their deposit minus any deductions but with any accrued interest.
If you intend to make any deductions, then you must provide your tenant with an itemized list. In this list, you must indicate any damages, as well as their respective charges. If your tenant fails to provide you with a forwarding address, then you can keep the security deposit.
If you fail to provide your tenant with a written list of deductions within 30 days of them terminating their tenancy, you’ll forfeit your right to make any deductions to the security deposit.
Withholding the Security Deposit
Wrongfully withholding your tenant’s security deposit may incur some penalties. You may be made to pay back the tenant double the amount you have wrongfully withheld.
Be advised mismanaging the security deposit can lead to legal ramifications, especially if it comes with a breach of the Fair Housing Act.
Pennsylvania Small Claims Courts allow a tenant to sue for up to a maximum of $12,000. In Philadelphia, Small Claims Courts are referred to as Municipal Courts. But in other cities, the courts are referred to as Justice Court.
Frequently Asked Questions Regarding the Pennsylvania Security Deposit Laws
Can a tenant use a security deposit as last month’s rent?
The only reason a security deposit could be used as rent would be if there was a written agreement between a landlord and tenant authorizing it.
Are landlords allowed to charge a cleaning fee in the state of Pennsylvania?
Yes but, you can only charge a cleaning fee if it is necessary to bring the unit back to its initial condition. Beyond that, you can only charge a cleaning fee against your tenant’s security deposit if the lease allows it.
Is a tenant’s security deposit taxable in the state of Pennsylvania?
In Pennsylvania, security deposits only become taxable once they become the property of the landlord. This can happen in these ways:
- If you apply the deposit to rent.
- If you make allowable deductions.
Bottom Line
Understanding security deposit laws is an important part of being a successful Pennsylvania landlord. But if you have any questions, it’s a good idea to contact a property management company like ourselves at One Focus.
One Focus Property Management is dedicated to providing the highest quality property management services. We can help you in various aspects, including property marketing, tenant screening, rent collection, property inspection, and even in financial reporting. Get in touch with us today to learn more!
Disclaimer: This blog isn’t a substitute for professional legal advice from a qualified attorney. Also, laws change, and this information may not be up to date. For expert legal advice, One Focus Property Management can help.