Maryland Security Deposit Law: The Landlord's Guide to RP § 8-203 in 2026

Maryland's security deposit statute is short, specific, and expensive to get wrong. Real Property § 8-203 tells you exactly how much you can collect, where the money has to sit, what interest it earns, and the 45-day clock that starts the moment the tenancy ends. Miss a step and the penalty is not a warning letter: it's a judgment for up to three times the deposit, plus the tenant's attorney's fees.

And the single most important fact in this guide is the one many Maryland landlords still have wrong: the cap is no longer two months' rent. It's one.

The deposit statute is a compliance checklist with a 3x penalty attached. Every requirement has a day count, and every day count has a consequence.

The One-Month Cap (and Why Your Lease Template May Be Outdated)

For decades, Maryland allowed security deposits up to two months' rent. That ended on October 1, 2024, when the Renters' Rights and Stabilization Act (HB 693, 2024) amended Real Property § 8-203 to cap deposits at the equivalent of one month's rent per dwelling unit, regardless of the number of tenants.

That's the same bill that created the Maryland Tenants' Bill of Rights, so if you updated your lease package for the Bill of Rights disclosure but kept a "two months' rent" deposit clause, your template is half updated. Fix both.

There is one narrow exception. A landlord may collect up to two months' rent when all three of these are true:

• The tenant has qualified for utility assistance through the Department of Human Services,
• The lease requires the tenant to pay utilities directly to the landlord, and
• Both parties agree to the higher deposit in writing.

If that fact pattern doesn't describe your tenancy, one month is the ceiling. Charging more is not a harmless drafting error: the tenant may recover up to three times the extra amount charged, plus reasonable attorney's fees.

The Receipt Requirement

Section 8-203 requires the landlord to give the tenant a receipt for the security deposit, and the receipt must be included in a written lease. In practice: put a deposit clause in the lease that states the amount received and the date, and have the tenant sign the lease. A separate receipt document also works, but the lease clause is the cleanest way to satisfy the statute and prove it later.

The companion section, RP § 8-203.1, prescribes specific tenant-rights language for the receipt. Most current Maryland lease templates build it in; if yours predates 2024, audit it.

Where the Money Has to Sit

Within 30 days of receiving a deposit, the landlord must put it in one of:

• An account at a federally insured financial institution doing business in Maryland, devoted exclusively to security deposits, bearing interest,
• Insured certificates of deposit at Maryland branches, or
• Securities issued by the federal government or the State of Maryland.

The "devoted exclusively" language matters. A deposit parked in your operating account is a statutory violation even if you never spend a dollar of it. One escrow account can hold deposits for your whole portfolio: the requirement is separation from your money, not one account per tenant.

Interest: the Rate, the Rules, the Calculator

Deposits earn simple interest at the greater of 1.5% per year or the daily U.S. Treasury yield curve rate for one year, as of the first business day of each year. The mechanics:

• Interest accrues from the day the tenant pays the deposit, at monthly intervals. No compounding, and no interest for a partial month.
• No interest is owed unless the landlord held the deposit for at least six months.
• Only deposits of $50 or more earn interest.

You don't need to build the spreadsheet. The Maryland Department of Housing and Community Development publishes an official Rental Security Deposit Calculator: enter the deposit amount, start date, and end date, and it computes the exact interest owed. When a tenant disputes the payout, the state's own calculator is a hard number to argue with.

For the paperwork side, the free Maryland Security Deposit Calculator applies the same methodology, shows the month-by-month schedule, and generates a signable Security Deposit Return Statement with the itemized deduction list, ready to print and mail with the refund. Every year's rate since 2015 is in the complete rate table.

The 45-Day Return and the Itemization Trap

The tenancy ends. The clock starts. Within 45 days the landlord must return the deposit plus accrued interest, minus any lawful withholding.

Lawful withholding covers exactly three things:

1. Unpaid rent.
2. Damage due to breach of the lease (for example, the actual losses from an early abandonment).
3. Physical damage in excess of ordinary wear and tear to the premises, common areas, major appliances, and furnishings, caused by the tenant or the tenant's family, agents, employees, guests, or invitees.

And here is the trap that produces more 3x judgments than anything else: if you withhold for damage, you must send the tenant, by first-class mail within the same 45 days, a written list of the damages claimed together with an itemized statement of the costs incurred. Fail to send that list on time and you forfeit the right to withhold any part of the deposit, even for damage that is real, photographed, and expensive.

Ordinary wear and tear is not deductible: faded paint, carpet worn by normal foot traffic, small nail holes, loose fixtures at the end of a long tenancy. Judges see inflated "full repaint and full recarpet" deductions constantly, and they read them as bad faith. Deduct what a contractor actually charged you to fix what the tenant actually broke.

The Tenant's Inspection Right

A tenant who requests it by certified mail at least 15 days before moving has the right to be present when you inspect the unit for damages. The inspection must happen within five days before or five days after the move-out date, and you must notify the tenant of the time. Honor the request and document the walkthrough: a tenant who watched you photograph the broken door is a tenant who rarely sues over the deduction for it.

Deposits, FTPR Cases, and Evictions

Security deposits and rent court intersect in three ways Maryland landlords should understand.

1. The deposit is not rent, and it can't prop up an FTPR claim

A Failure to Pay Rent case under RP § 8-401 is about unpaid rent: the fixed periodic charge for use and occupancy. A tenant's failure to top up a deposit, or a "deposit installment" the lease labels as rent, doesn't belong on a DC-CV-082. See What Counts as "Rent" in a Maryland FTPR Case for where that line sits after the 2024 case law.

2. Holding a deposit doesn't reduce what you can claim

You do not credit the deposit against arrears before filing. The deposit secures the tenancy until it ends; the FTPR claim is the rent actually outstanding on the filing date, documented by a clean rent ledger. Applying the deposit mid-tenancy converts your security into spent rent and leaves the unit unsecured.

3. After eviction, the return rules flip

If the tenant was evicted or ejected for breach of the lease, or abandoned the premises, the automatic 45-day return protections do not apply. Instead, the burden shifts: the former tenant must send you a written demand by first-class mail within 45 days of the eviction or abandonment. If they do, you then have 45 days from receipt of the demand to send the itemized damages list and return any balance with interest, and the 3x penalty applies to that deadline just as it does to a normal move-out. If no demand arrives, apply the deposit to unpaid rent and damages, keep the documentation, and keep your math honest: a deposit applied to arrears reduces what you can collect on the money judgment. Recovering the same month's rent twice, once from the deposit and again through collection, invites exactly the dispute the statute punishes.

A judgment for possession does not erase deposit law. Landlords who win the eviction and then sit on the deposit paperwork give a tenant who lost in rent court an easy win in a deposit suit.

Penalties, Summarized

• Overcharging the cap: tenant recovers up to 3x the excess plus attorney's fees.
• Wrongful withholding: tenant recovers up to 3x the withheld amount plus attorney's fees.
• Late or missing itemization: total forfeiture of the right to withhold, which converts even legitimate damage deductions into wrongful withholding exposure.

Small dollar amounts, multiplied. A $1,800 deposit mishandled is a potential $5,400 judgment plus fees, on a dispute that a receipt, a calculator printout, and a mailed list would have ended in five minutes.

The Compliance Checklist

Run this on every tenancy:

• Deposit ≤ 1 month's rent (post-October 2024 leases)
• Receipt in the signed written lease
• Deposit banked in a Maryland deposit-only interest-bearing account within 30 days
• Late fees in the same lease capped at 5%: see Maryland's 5% Late Fee Cap
• Move-out: inspection scheduled if the tenant requested one by certified mail
• Interest computed with the DHCD calculator
• Itemized damages list with costs mailed first-class within 45 days, if withholding
• Refund out the door within 45 days
• Evicted or abandoned tenancy: calendar the 45-day demand window and answer any demand within 45 days of receipt

Related reading:

• Maryland Security Deposit Interest Rate: Every Year's Rate and How the Math Works
• Maryland's Tenants' Bill of Rights: Landlord Compliance Guide
• Maryland's 5% Late Fee Cap: What Landlords Can Actually Charge
• The Rent Ledger That Wins in Maryland Rent Court
• What Counts as "Rent" in a Maryland FTPR Case
• How to Evict a Tenant in Maryland: The Complete 2026 Guide

When the deposit is spent and the rent is still unpaid, the next step is the statutory 10-day notice that starts every Maryland FTPR case: