Collecting the Last Month’s Rent: PROCEED WITH CAUTION

From Massachusetts General Laws: MGL Ch. 186 Sect. 15B(2)(a)

(SOURCE: https://malegislature.gov/Laws/GeneralLaws/PartII/TitleI/Chapter186/Section15B)
(You’ve heard this before, but please continue reading; an interesting situation follows.)
When you receive Last Month’s Rent from a tenant, you must give that tenant a receipt containing:

• The amount received.
• The date of receipt.
• Wording indicating the money is for Last Month’s Rent.
• The name of the person receiving the money (most likely, that’s you.)
• Verbiage indicating that the tenant is entitled to interest on that money at the rate of 5% per year, or “… other such lesser amount of interest as has been received from the bank where the deposit has been held.”
• A statement that the tenant should provide you, the landlord, with a forwarding address at the termination of the tenancy where any accumulated interest can be delivered.
• Description of the rented apartment.

These are your legal obligations:

• As stated above, interest must be paid to the tenant at the rate of 5% per year “… or other such lesser amount …” paid by your bank.
• For your own bookkeeping:
  • Annual interest begins on the 1^st day your tenant takes occupancy. 
  • “Interest shall not accrue for the last month for which rent was paid in advance.”
• At the end of each year of tenancy, you must provide the tenant with a statement showing the amount payable.  That statement may offer the tenant the option of (1) deducting that amount from the next scheduled rent payment, or (2) receiving that amount in cash or check.
• You must provide this statement to your tenant within 30 days of the anniversary date.  If you neglect to do so, your tenant can deduct interest from the next rent payment without your permission.  And that tenant will undoubtedly do so at the 5% rate.
• When a tenant terminates the tenancy, whether or not on the anniversary of the lease, you must pay any accrued interest within 30 days of the last day of occupancy.  Failing to do so, a tenant can be “… awarded damages in an amount equal to three times the amount of interest to which a tenant is entitled, together with court costs and reasonable attorneys fees.”

A Tenant’s Predicament
We’ve lived in our apartment for twenty years.  Back then, when we first took the apartment, we paid $900 for the last month’s rent.  Two years ago, the property was sold and the $900 was transferred to the new owner.  We know this because it’s on our new lease.

We were never aware that we were supposed to receive the interest yearly.  For twenty years, we never received a statement, payment, or rent deduction, nor have we ever asked for one.  We recently purchased a home and are planning to stop renting.

• Are we entitled to twenty years of interest?
• We have no idea whether or not the previous landlord transferred the interest to the new owner.  Is the current landlord responsible for the entire twenty years, or just the two years they’ve owned the property?
• Did the interest payments have to be specified in the lease, or are we covered under the law?

Response:
(SOURCE: malawforum.com “The Forum for Massachusetts Law”, Atty. David M Owens of Grolman LLP.
DISCLAIMER: “The answers and information provided on this site are for informational purposes only and are NOT substitutes for professional legal advice.  Before making legal decisions, you should discuss your specific circumstances with an attorney.”)

“You are entitled to the interest.”

After explaining MGL Ch. 186 Sect. 15B, Attorney Owens goes on to say that that the statute specifically states that when someone buys the property, they must receive the Last Month’s Rent amount plus accrued interest from the seller.  The new owner then becomes liable for paying interest to the tenant.

He concludes that the tenant would probably be legally justified in “… suing the current landlord for the whole amount due, including penalties.  If you have already paid your second to last month’s rent and need to pursue the current owner to get the interest back, I would recommend sending them a demand letter first.  Violations of this law are also consumer protection violations and you may be able to get attorney’s fees back if you are forced to go to court.”

Editorial Comment
If my math and spreadsheet skills are correct – and I welcome all scrutiny:
A principle of $900, at 5% interest compounded annually and never redeemed, yields a principle of $2,274 over 20 years.  If I were a tenant in a similar situation, I would be demanding $4,122 from the current landlord.

Of the $2,274, the initial $900 belongs to my landlord for the last month’s rent, but the rest, $1,374 rightly belongs to me.  All those missed interest payments could have been working for me in my bank account, so not a dollar over $900 should go into the landlord’s pocket.  Because the statute says I am entitled to three times the amount due, $1,374 x 3 = $4,122 - and that is my number.

As for the 5% interest, my argument would be that since interest rates have fluctuated so much over the past twenty years, five percent seems a fair and equitable compromise.

What do you think?  Is collecting Last Month’s Rent worth the effort and the risk?  When we get to our Best Practices segment on securing the lease, it might be a good topic of discussion.