A Monthly Fee Instead of a Security Deposit? Bond Bill Makes Rare Change to MGL 186 15B

By Kimberly Rau, MassLandlords, Inc.

The $5.1 billion housing bond bill, signed by Gov. Maura Healey in August 2024, includes a provision that could allow landlords and tenants to agree to a monthly fee in lieu of paying a security deposit up front. If the Executive Office of Housing and Livable Communities (EHOLC) creates such regulations, it would effectively change MGL 186, Ch. 15b, the law governing security deposits and move-in monies.

Take a big security deposit up front, or get a smaller monthly fee over the course of the lease? The new bond bill gives EOHLC the right to create regulations for landlords to give tenants the choice. (Image: 123rf)

The provision states that landlords who would normally collect a security deposit may now offer a second option to their potential tenants: a monthly fee that is more flexible than the security deposit. For example, unlike a security deposit, which remains the property of the tenant, the fee would belong to the landlord, and could be used or saved as necessary.

There are some caveats. The total amount of money collected over the course of the tenancy cannot exceed one month’s rent, just as a security deposit amount cannot. However, unlike a traditional security deposit, the monthly fee may be entirely or partially non-refundable, as long as that is made known to the tenant in writing.

One vague portion of the provision is that landlords are not allowed to continue to collect a fee in excess of a total of one month’s rent, even if the lease is “extended.” It does not say what happens if you terminate the lease entirely with your tenant and then have them sign a new one. If you cannot continue to collect a fee, then you’d better have saved that money if you intend to use it to fix damages later on. If you can continue to collect a fee, your tenants could end up paying far more than a traditional security deposit.

Further, at any point, your renters can decide they do not want to continue to pay the fee. If that happens, you may require them to pay a traditional security deposit starting that day. However, the total they pay between fee and security deposit cannot exceed one month’s rent.

If you choose to offer the fee option, you must offer it to all of your approved applicants, “regardless of income, race, gender, gender identity, disability, sexual orientation, immigration status, size of household or credit score.”  You also cannot charge a higher fee based on any of these criteria. (You may still deny tenancy based on household size or credit score. But if you approve an applicant with a certain credit score or household size, you cannot withhold the fee option, or charge a higher fee than you otherwise would.)

What’s particularly interesting about this provision is that there is no mention of the dreaded triple damages plus attorneys’ fees that can be applied in traditional security deposit litigation. This has the potential to seriously disrupt the legal services profession in Massachusetts, which profits off of damage awards from security deposit cases. If the fee catches on, there will be far fewer small-time landlords going to court and losing money over security deposit mishandling.

This protection against eye-watering court-ordered damages may make the fee a much more attractive option for some landlords. However, remember you cannot force your tenants to pay the fee if they would rather pay a security deposit.

The provision does not automatically make this option law. Rather, it allows the EHOLC to create regulations that would permit the changes. We will continue to update you as things progress.