Maryland Security Deposit Rules — The 1-Month Cap + Interest Accrual

Maryland is one of the few states that combines a strict deposit cap (1 month's rent) with mandatory interest accrual and a triple-damages exposure for mishandling. The result is a deposit regime closer to Massachusetts than to Virginia or DC. Operators running multi-jurisdictional portfolios that include Maryland units routinely under-comply because they apply Virginia-style assumptions across state lines. Here's the actual rule under Md. Code Real Prop. § 8-203 — and the documented compliance discipline that survives a small-claims action.

The 1-month cap

Md. Code Real Prop. § 8-203(b) caps the security deposit at the equivalent of one month's rent. A narrow exception allows up to 2 months when:

1. The tenant is eligible and has qualified for utility assistance through the Department of Human Services,
2. The lease requires the tenant to pay utilities directly to the landlord, and
3. The landlord and tenant agree in writing to the amount of the deposit.

Outside this narrow exception, a tenant charged more than one month's rent may recover up to three times the extra amount charged, plus reasonable attorney's fees, at any time during the tenancy or within 2 years after it ends.

The interest accrual rule

Maryland requires simple interest to accrue on a deposit of $50 or more once the landlord has held it for at least 6 months. The rate is the greater of the 1-year U.S. Treasury yield curve rate (as of the first business day of each year) or 1.5% a year; the Department of Housing and Community Development publishes those rates and a calculator that landlords may rely on.

The interest must be:

• Accrued at monthly intervals from the day the deposit is paid (no interest for a partial month, or unless the deposit is held at least 6 months; deposits under $50 earn none).
• Paid to the tenant with the deposit within 45 days after the tenancy ends.
• Simple interest, never compounded.

Operators who fail to track interest end up with a deposit liability that exceeds the amount collected. The rate is never below 1.5% a year; over a multi-year tenancy this becomes material.

The 45-day return + itemization

Within 45 days after the tenancy ends, Md. Code Real Prop. § 8-203 requires the landlord to:

• Return the deposit plus accrued interest, less damages rightfully withheld.
• If anything is withheld, send a written list of damages with an itemized statement of costs and supporting documentation, by first-class mail to the tenant's last known address.

The 45-day clock is strict — significantly longer than the 30-day window in many states, but unforgiving once missed.

The move-in / move-out inspection rights

Maryland imposes specific move-out inspection rights:

• When the deposit is paid, the tenant must be advised in writing of these inspection rights, including the right to be present at the move-out inspection (§ 8-203(f)(1)(vi)). Failing to give that written notice forfeits the landlord's right to withhold any part of the deposit for damages (§ 8-203(f)(1)(vii)).
• If the tenant gives notice by certified mail at least 15 days before moving (with the moving date and new address), the landlord must reply by certified mail with an inspection date within 5 days before or after the move.

Document pre-existing damage anyway. § 8-203 lets you withhold only for unpaid rent, damage due to breach of lease, or damage by the tenant (or their family, agents, employees, guests or invitees) beyond ordinary wear and tear — so a deduction for damage that was already there at move-in is not rightfully withheld, and withholding without a reasonable basis exposes you to the 3× action below. A move-in record is how you show which damage came later. (The statute itself provides a formal move-in damage list only for a tenant who buys a surety bond and requests the inspection by certified mail within 15 days of occupancy.)

The 3× damages exposure

Md. Code Real Prop. § 8-203(e)(4) provides that a landlord who, without a reasonable basis, fails to return any part of the deposit plus interest within 45 days after the tenancy ends is liable for up to 3× the withheld amount plus reasonable attorney's fees. Under § 8-203(g)(2), failing to mail the itemized list forfeits the right to withhold anything for damages. This is the rule that makes Maryland deposit mishandling more expensive than the deposit itself. A $1,800 deposit withheld in full without a reasonable basis can become a claim of up to $5,400, plus reasonable attorney's fees.

The lead-paint registration crossover

A Maryland-specific operator trap: pre-1978 rental units must be registered with the Maryland Department of the Environment (MDE) and the registration kept current — since January 1, 2026 each renewal covers two years — and must pass a lead-dust inspection by an MDE-accredited inspector before every change in occupancy. Non-compliance has a sharp consequence — a Failure-to-Pay-Rent complaint on an affected property must state that the property is registered and the registration renewed, and give the inspection certificate number for the current tenancy (Md. Code Real Prop. § 8-401(b)(2)(vi)), so an unregistered property cannot make the statement the complaint requires.

This rule doesn't directly affect deposit handling, but it's part of the same compliance discipline. A property that isn't lead-registered can't bring a Failure-to-Pay-Rent case on that footing; a deposit dispute, by contrast, can still be litigated by the tenant, during the tenancy or within 2 years after it ends. The structural mismatch favors tenants on unregistered properties.

Local layer: Montgomery County and rent stabilization

For deposits on units subject to Montgomery County's Right to Stable Housing Act (2023), the state-level deposit rules of § 8-203 still apply, but rent-increase rules add a separate compliance layer. The cap on annual rent increases for regulated units — County-licensed rental units at least 23 years old, outside the municipalities that run their own programs — is the lower of CPI + 3% or 6%, and the County's housing department publishes each year's figure. Operators should not conflate the two regimes — § 8-203 sets the deposit rules in every locality; check the county code for any local landlord-tenant requirements on top.

Compliance checklist

For every Maryland rental:

1. Cap the deposit at one month's rent (or document the utility-assistance exception in writing).
2. Deposit within 30 days into an interest-bearing account used only for security deposits, at a Maryland branch of a federally insured institution (or in insured CDs or federal/Maryland securities).
3. Give the written notice of the tenant's § 8-203(f) rights (including the move-out inspection) when the tenant pays the deposit.
4. Move-in inspection report with photographs and tenant signature.
5. Accrue simple interest monthly at the greater of the 1-year Treasury rate (MDHCD publishes the list) or 1.5%. Pay it with the deposit at the end of the tenancy.
6. Move-out itemization by first-class mail within 45 days after the tenancy ends, with documentation identifying the materials or services. If you use estimates, send the final invoice once repairs are done and refund any excess within 30 days.
7. For pre-1978 properties: confirm the MDE lead registration is current, and the inspection certificate for the current tenancy is on file, before any eviction filing.

How Proprietio handles Maryland deposits

Proprietio's Maryland-tier lease template caps the deposit at one month and prompts for the utility-assistance exception when applicable. Interest accrues automatically at each year's statutory rate, the greater of the 1-year Treasury rate MDHCD publishes for that year or 1.5%, and new yearly rates can be added without a redeploy. The 45-day return clock is tracked with a 5-day-before reminder. For pre-1978 properties, the MDE lead registration is a required field on the property record, blocking eviction-filing workflows until verified.

Maryland deposit compliance isn't difficult — it just has more moving parts than Virginia, DC, or Pennsylvania. The 1-month cap is the headline; the 45-day return, the interest accrual, the inspection rights, and the lead registration are where multi-state operators routinely under-comply. The 3× damages rule makes that under-compliance expensive.