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The Pennsylvania Landlord and Tenant Act, Sections 250.511a to 250.512, governs the collection and repayment of security deposits in Pennsylvania. Landlords and property managers must adhere to these regulations in order to ensure the safety of all parties involved in the lease agreement.

Maximum Deposit

A security deposit in Pennsylvania may not exceed two months' worth of rent. The landlord is only permitted to request one month's rent as a security deposit for leases that are extended after the first year. Even if the rent increases, the landlord may not increase the security deposit amount for lease extensions lasting more than five years. Furthermore, if a tenant wants to waive them, these restrictions still stand. However, these restrictions only apply to residential property.

Allowable Deductions

The landlord is only allowed to make deductions from the security deposit once the lease has ended or been canceled. Additionally, the tenant's security deposit may only be used for:

  1. The cost of any damage to the rental property.
  2. Unpaid rent.
  3. Any breaches in terms of the rental agreement.

Deposit Holdings

The landlord needs to do one of the following if the security deposit is more than $100:

  1. The security deposit could be held by the landlord in an interest-bearing or non-interest-bearing escrow account at a bank or other establishment governed by the Federal Home Loan Bank Board, Federal Reserve Board, Pennsylvania Department of Banking, or Comptroller of the Currency:
  • Security deposits over $100 must be placed in an interest-bearing escrow account if the lease is renewed after the first two years and the security deposit is in an interest-bearing account. The interest accrued on such an account will be paid to the lessee annually on the anniversary of the lease and will belong to the tenant. However, as an administrative fee, the landlord is permitted to retain 1% of the security deposit.
  • The landlord is required to inform the tenant of the name and address of the bank or other organization where the security deposit has been placed as well as the exact amount that has been put there before placing the deposit in escrow. There must be written notice of this.
  1. The landlord may obtain a bond from a surety company authorized in Pennsylvania with the condition that at the conclusion of the lease, the landlord will restore the security deposit to the tenant less any permitted deductions.

Tenant's Obligations

Only if the tenant's breach of a specified obligation resulted in the damage, may the landlord recover the cost of repairs. The following requirements must be met by the tenant in order to comply with the specified rule:

  1. The structure or housing unit, as well as any amenities, equipment, or appurtenances, may not be damaged, defaced, removed, or impaired in any way by the tenant's invited visitors.
  2. Not remove any portion of the building or housing unit, along with any associated amenities, equipment, or facilities, knowingly or carelessly.
  3. Not allow anyone on the property to knowingly or wantonly interfere with other tenants' or neighbors' pleasant enjoyment of the space.

Returning Deposit

Time Frame

The security deposit and any unpaid or uncredited interest must be returned by the landlord to the tenant within 30 days after the end of the lease or the day the tenant vacates the property, whichever comes first. If the landlord plans to deduct money, they must also give the lessee a written list of the deductions and restore any remaining security deposit funds within the same time limit. The landlord shall be released from all liability if the tenant fails to give the landlord a forwarding address in writing.

Penalty for Failure to Return the Security Deposit on Time

The amount withheld from the lessee, which is the difference between the security deposit plus interest and the entire amount of permitted deductions, may be doubled if the landlord fails to restore the security deposit or what is left of it. Small Claims Court, commonly known as "Municipal Court" in Philadelphia or "Justice Court" throughout the rest of Pennsylvania, allows tenants to file lawsuits for up to $12,000.

Penalty for Failure to Provide the Written List

Landlords forfeit all rights to security deposits or any portion of them, as well as the right to bring legal action against the tenant for property damage, if the landlord does not provide the written list of deductions or claims on the deposit within 30 days of terminating the tenancy.

Additional Rules

Failure of the Tenant to Provide a Forwarding Address

The landlord will be released from all responsibility for the security deposit and its accounting if the lessee fails to give the landlord a forwarding address.

Receipt Requirements

Under Pennsylvania security deposit laws, the landlord is not required to give the tenant a receipt for the tenant's deposit.

Security Deposit Interest

It is not usually required by Pennsylvania law to pay interest on security deposits. Only when the security deposit is deposited in an interest-bearing escrow account is the landlord obliged to pay interest on the amount. Only when the lease is extended or renewed after the first two years and the security deposit is greater than $100 is it necessary to put the tenant's deposit in an interest-bearing account.

When a lease expires or is relinquished and accepted for the leasehold property during the third year of the agreement, the landlord is entitled to one month's rent as escrow. The tenant will receive a refund of the escrow money plus interest. Any increase in rent shall not necessitate an increase in the security deposit if the tenant has occupied the property for five years or more. Keep in mind that this only applies to residential units.

The Bottom Line

The key to becoming a successful Pennsylvania landlord is having a solid understanding of Pennsylvania security deposit laws. You also need to be aware of the legal eviction procedure, landlord-tenant laws, lease or rental agreement law, and any other rental rules. This will ensure that you are able to maintain a positive relationship with your tenants.

FAQs

Is the Tenant’s Security Deposit Taxable in Pennsylvania?

Under Pennsylvania security deposit law, security deposits only become taxable once they are transferred to the landlord. This happens if you apply the deposit to the rent or if you make allowable deductions.

Can a Tenant Use a Security Deposit as Last Month’s Rent?

Only if there was a written agreement between the landlord and tenant approving it could a security deposit be utilized as the last month's rent.

Are Landlords Allowed to Charge a Cleaning Fee in Pennsylvania?

Yes; however, you can only do so if it is necessary to restore the rental unit to its original state. Beyond that, if the lease permits it, you may only deduct a cleaning fee from the tenant's security deposit.

When Must the Landlord Return the Deposit?

The landlord must refund the tenant's deposit if no deductions have been made within 30 days after the lease termination.

Even if deductions have been made, the landlord must reimburse the lessee for the remainder of the security deposit within 30 days. The tenant could receive up to double the amount owed if the landlord doesn't comply.

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Resources

  1. https://casetext.com/statute/pennsylvania-statutes/statutes-unconsolidated/title-68-ps-real-and-personal-property/chapter-8-landlord-and-tenant/landlord-and-tenant-act-of-1951
  2. https://www.findlaw.com/state/pennsylvania-law/pennsylvania-security-deposit-laws.html
David Bitton

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!