Bill Summary – FastDemocracy

SB 892
                       Department of Legislative Services
                               Maryland General Assembly
                                     2021 Session
                            FISCAL AND POLICY NOTE
                                   First Reader
Senate Bill 892                  (Senator Augustine, et al.)
Judicial Proceedings
         Real Property – Residential Leases – Fee in Lieu of Security Deposit
This bill authorizes a landlord and a tenant to agree for the tenant to pay a fee in lieu of a
security deposit that is (1) paid in any amount and at any interval and (2) partially or wholly
nonrefundable. The bill prohibits a landlord from requiring a tenant to pay a fee in lieu of
a security deposit and establishes that a landlord is not required to consent to payment by
a tenant of a fee in lieu of a security deposit. The bill applies prospectively only and may
not have any effect on or application to any lease entered into before its October 1, 2021
effective date.
                                     Fiscal Summary
State Effect: The bill is not anticipated to materially affect State government operations
or finances.
Local Effect: The bill is not anticipated to materially affect local government operations
or finances.
Small Business Effect: Potential meaningful.
                                          Analysis
Bill Summary: If a landlord and a tenant agree to payment of a fee in lieu of a security
deposit, the landlord must disclose in the terms of the lease, and the tenant must separately
acknowledge:
      that the tenant has agreed to pay, and the landlord has agreed to accept, a fee in lieu
       of a security deposit;
      the method by which the fee in lieu of a security deposit may be paid, including as
       a lump sum or as a periodic payment; and
      whether the fee in lieu of a security deposit is refundable and, if so, the amount that
       is refundable.
A landlord that uses a fee paid in lieu of a security deposit to purchase insurance coverage
for nonpayment of rent, breach of lease, or damages caused by the tenant must purchase
coverage issued by an admitted carrier licensed by the Maryland Insurance Administration.
Pursuant to existing statutory provisions, the requirements under the bill regarding a fee
paid in lieu of a security deposit may not be waived in any lease.
Current Law: Generally, a “security deposit,” with regard to residential leases, is defined
as any payment of money to a landlord by a tenant for the purposes of protecting the
landlord against nonpayment of rent; damages due to a breach of the lease; or damages to
the leased premises, common areas, major appliances, and furnishings. A security deposit
may include advance payment of the last month’s rent. Statutory provisions set forth
various requirements regarding security deposits, including those relating to receipts,
accounts in which security deposits must be maintained, timeframes for returning security
deposits, and withholding deposits from tenants. A landlord may not impose a security
deposit that exceeds the equivalent of two months’ rent per dwelling unit, regardless of the
number of tenants. Requirements regarding security deposits, as established under
§ 8-203 of the Real Property Article, may not be waived in any lease.
If a landlord requires from a prospective residential tenant any fees other than a security
deposit, and the fees exceed $25, the landlord must return the fees or be liable for twice the
amount of the fees in damages. The return must be made within 15 days following the date
of occupancy or the written communication that no tenancy will occur. However, the
landlord may retain the portion of the fee that was actually expended for a credit check or
other expenses arising out of the application, as specified. These provisions are not
applicable to landlords who offer four or fewer dwelling units for rent at one location or to
seasonal or condominium rentals.
Small Business Effect: Small business landlords are authorized to accept a fee in lieu of
a security deposit, including a fee that may be partially or wholly nonrefundable, but they
are subject to specified requirements if doing so.
                                Additional Information
Prior Introductions: None.
SB 892/ Page 2
Designated Cross File: None.
Information Source(s): Judiciary (Administrative Office of the Courts); Department of
Housing and Community Development; Maryland Insurance Administration; Department
of Legislative Services
Fiscal Note History:    First Reader - February 28, 2021
md/jkb
Analysis by: Donavan A. Ham                         Direct Inquiries to:
                                                    (410) 946-5510
                                                    (301) 970-5510
SB 892/ Page 3
Statutes affected: 
Text - First - Real Property – Residential Leases – Fee in Lieu of Security Deposit: 8-203 Real Property