An Overview of Montana Security Deposit Laws
The laws governing security deposits in Montana are designed to establish a fair framework for landlords and tenants, ensuring that financial interests of both parties are protected. These regulations not only prevent disputes over missing funds but also help safeguard against fraudulent practices that can lead to financial loss. A security deposit in Montana typically covers unpaid rent and any repairs needed beyond normal wear and tear to the rental unit . Most tenants entrust a good amount of their money to their landlords as this is often the only way to secure an apartment or home in this state. Tenants in Montana should familiarize themselves with these security deposit laws to avoid losing this hard-earned money. Moreover, landlords should equally know about Montana security deposit laws so they stay within the boundaries and do not lose this money to punishments under the law.
The Maximum Allowed Amount of Security Deposits
The rules on how much can be withheld from a tenant’s security deposit are subject to the same cap as the amount that can initially be charged. The Montana Code Annotated Section 70-25-201 declares that a landlord cannot charge a tenant more than "1 month’s rent" for their security deposit, and it similarly prohibits landlords from keeping more than can be reasonably expected to pay for damages while allowing them "at least 30 days" to complete any repairs. With very few exceptions, these limitations are the same whether the landlord intends to keep the funds or return them to the tenant.
For an exempt apartment, a landlord can charge a nonrefundable move-in fee—not to exceed seventy-five dollars ($75)—for the costs of preparing a rental unit for occupancy. A landlord cannot seek to recoup move-in fees or charges from a tenant’s security deposit unless those fees or charges relate to damage that occurred within the duration of the lease. The nonrefundable nature of this preparation fee means that it is intended to be lawfully retained by the landlord. However, a landlord may not apply this fee to the necessary repairs that must be completed before the tenant can occupy the apartment without losing out on the right to charge for those repairs through either a rent increase or reduction in the tenant’s security deposit.
If a smoke detector has been destroyed, damaged, or neglected, a landlord may charge a tenant the lesser of $50 or the actual cost to replace or repair the detector, but only if the tenant is provided written notice of the full cost before they enter the rental unit.
Requirements for Holding and Storing Deposits
Under Montana law, if the tenant has paid a security deposit to the landlord of a single family residence or a lease of one month or longer for other residential property, the landlord must hold the security deposit in a federally insured institution located in Montana. If the security deposit is one month’s rent or more, the financial institution must pay interest on the deposit if the interest earned in the previous calendar year on the deposit was $5.00 or more. The landlord, within 10 days after a tenant requests the return of the deposit or any portion of it or if the tenant vacates the premises without requesting the deposit, shall send by mail or directly deposit with the tenant all of the subtracted amounts in subparagraphs (a) through (c) below:
(a) the full amount;
(b) the full amount less 5% of the deposit or less than the actual amount of damage or unpaid rent, whichever is greater; or
(c) the full amount less an amount agreed to by both the landlord and tenant.
If the tenant has vacated the premises as evidenced by written notice to the tenant, when the landlord has mailed or directly deposited the items in (a), (b), or (c) above, the landlord shall mail written notice to the tenant.
If the tenant does not agree with the subtracted amount or believes the full amount should have been paid, the tenant may file suit in the district court of the county in which the tenant resides. This suit must be filed within one year of the time that the tenant vacated the premises. If the court determines that the deposit has been wrongfully withheld, the tenant shall be awarded an additional amount equal to the withheld deposit, reasonable attorney fees, costs of suit, investigation expenses, and any money expended by the tenant to pay for the charges to replace the deposit.
Circumstances Where Deductions From Security Deposits Are Allowed
Under Montana law, landlords have the right to withhold a certain portion of a tenant’s security deposit to cover damages or other outstanding costs related to the rental of their property. While landlords have some leeway in determining what these deductions should be, they cannot be arbitrary or discriminatory. Some common, acceptable deductions include:
- Unpaid rent. If you haven’t paid your last month’s rent, your landlord may be allowed to deduct it from your security deposit. However, if the landlord has previously agreed to accept the last month’s rent together with a security deposit, they cannot use the security deposit to pay the last month’s rent unless the tenant hasn’t failed to pay that rent.
- Repairs. The landlord may deduct reasonable costs to repair damages brought about by you or your guests. This includes damage to walls and flooring, or resulting from issues such as plumbing or vermin. The landlord is not allowed to make deductions for wear and tear. For example, they cannot deduct costs for new blinds or to replace carpeting when the carpet is worn by normal use. Again, this should be reasonable costs for repair, not replacement, following your exit. If the property is damaged beyond reasonable wear and tear, the landlord can be justified to deduct the cost of repairs from your deposit. If the landlord is replacing carpet, flooring, or any other item that was not damaged as a result of your occupancy, they must prove that such a replacement item is truly necessary before even thinking about any deduction.
- Removal of a pet. If a tenant removes a pet before the end of the lease and the subsequent vacancy caused either a loss of rental income and/or an expense in cleaning the apartment and possibly repainting the apartment, the landlord may deduct the amount that the vacancy caused them. If the tenant had been charged additional rent on top of the normal rent for being able to have an animal in the apartment, then it is reasonable for the landlord to deduct the pet addendum money from the security deposit.
- Cleaning. Security deposits are typically not used to pay for normal carpet cleaning or cleaning that is caused by reasonable human use. For example, if fingerprints on the wall or scuff marks on the floor are noticed by the landlord, are these really something that should not have occurred in the apartment? Are these items considered normal wear and tear that isn’t the tenant’s responsibility? If the wear and tear is a result of structural issues or leftover damage from previous tenants, it cannot be charged to the current tenant who is simply performing normal upkeep and maintenance. In fact, the definition of normal wear and tear in Montana law means that wear and tear from normal living is to be expected, and therefore should not be deductible from the security deposit. If you hire a professional cleaning service to perform an overall cleaning for you, the percentage can be deducted from the security deposit, but not for cleaning specific items such as the refrigerator or stove. Purchases such as a new vacuum cleaner for the premises cannot be paid for from the security deposit, but the typical vacuuming by a cleaning service is a normal expense that is part of renting a property.
- Other expenses. If an unpaid utility was in the name of the tenant, that utility will be deducted from the security deposit as well.
The deduction of all or part of the security deposit is generally done in the absence of any other agreement between the tenant and the landlord and without any further evidence of the nature of the upcoming deductions. Though a landlord may be justified in withholding a tenant’s security deposit, such a practice should not be taken lightly, and it is advisable to seek the advice of an attorney if you are uncertain regarding any deposition deduction.
Security Deposit Refund Process
The landlord must return the security deposit or a written accounting of the amounts deducted within 30 days after the tenant vacates the rental premises. MCA 70-25-201 | 70-25-501
To return the security deposit to the tenant, the landlord must send the check to the tenant’s last known address as stated in the lease or the rental agreement. MCA 70-25-201 | 70-25-502(1)
If the landlord deducts any amounts from the security deposit, they must provide the tenant with an itemized statement in writing showing each deduction and the reason for each deduction. MCA 70-25-201
The landlord has the option to accompany the itemized statement with photographs of the damage . MCA 70-25-502(2)
The exception to the rule is that the landlord is not required to furnish an itemized statement if the rent was not current when the tenant vacated the rental. MCA 70-25-502(3)
If the landlord fails to refund the security deposit (or an itemized statement, if applicable), they may be liable to the tenant for the following:
Again, the exception to the rule is that the landlord shall not be liable for failure to refund the security deposit (or an itemized statement, if applicable) if the landlord did not know the whereabouts of the tenant. MCA 70-25-512, 2014.
How to Resolve Montana Security Deposit Disputes
In the event that a landlord and tenant in Montana find themselves at odds over the withholding of part or all of a security deposit, there are a few different avenues they may take to seek resolution. The tenant may first want to send a demand letter (which is not required by law) to try and get the landlord to return the security deposit or remedy the issue with the claim. In this situation, it’s best to contact a Montana landlord-tenant attorney, who may advise sending the letter on behalf of the tenant.
If the dispute cannot be resolved informally through communications, the next step is generally to go through informal resolution via a local mediation service. In Montana, this small claims mediation program has been offered by the District Court for over twenty years, and about two-thirds of the parties sign a written agreement that meets their needs on average. A mediator will meet with both the tenant and landlord individually to prepare for the issue without the other party present, and then after talking with both parties, can facilitate a discussion about the issue. The goal is not to force the parties into an agreement that isn’t right for them, but is instead to empower them to make an agreement that is satisfactory to all parties. The written agreement that results from the process is binding, and if one party doesn’t abide by it, the other party may proceed to trial.
A little more than twenty percent of all disputes end up going to a small claims court trial instead of towards resolution via the mediation program. Small claims courts in Montana deal with civil disputes among people that don’t have a lot of money at stake. A small claims court in Montana is more informal than other courts. While it isn’t entirely unregulated, the rules are more flexible, and each person involved in the case is allowed to represent themselves without having an attorney. Courts in Montana can award up to $7,000.
Recent Changes or Amendments to Montana Security Deposit Laws
Montana recently passed some legislation that affects the rules around security deposits and how landlords can handle them. Although the changes took place on October 1, 2017, they will still affect all security deposits taken after that date. It’s clear that the intent behind the change is to make security deposit rules easier for tenants to understand and enforce.
One of these changes is to 70-24-301(2), MCA (one of the old laws regulating security deposits in Montana). The section used to restrict security deposits to one month’s rent, but now that section creates a maximum of two month’s rent. The purpose of this is to allow landlords to take a larger amount for security deposits, as happens more in apartment situations where there are multiple tenants. Landlords may still only take up to one month’s rent for a security deposit if they choose, but this amendment now allows them the option of taking a larger amount as well.
Another amendment, to 70-25-501(2), MCA—a new section which lists out the total requirements of a security deposit—adds some language to enforce the previously-existing requirement for security deposits to go into an account that pays interest at the legal rate. It reads: "Until returned under 70-25-305, any security deposit in an amount in excess of $150 or an amount equal to the rent for 1 month, whichever is greater, must be deposited in an interest-bearing account bearing interest at the current legal rate." The language is a punitive measure, in case a landlord doesn’t keep the account up to the proper interest rates. It also isn’t the same as the type of interest-bearing account that a tenant earns interest in—it’s about charging the landlord interest on the security deposit account.
There’s no enforcement mechanism here though. Without this section, if a landlord didn’t pay interest on a large enough security deposit, that would be fine; the tenant couldn’t do anything about it. With this section, the tenant would be in a better position to argue that the landlord must allow them to keep the interest. It’s too soon to tell how this change will affect actual disputes, but tenants are now allowed to try and keep that interest per this section.
It’s important to be aware of how changes and updates impact your rental agreements, especially when those contracts extend beyond the date of a new law. It’s also important to remember that with law changes, tenants may be unaware of what they’re legally entitled to until they try to get it from the landlord. If a tenant has a good attorney, they’ll be prepared to aggressively pursue those interests, so be prepared to come up against them.
Helpful Tips for Landlords and Tenants
To help comply with Montana’s security deposit law, landlords and tenants in Montana should keep the following practical tips in mind: Maintain clear and comprehensive records. Accurate and detailed records are crucial to ensure compliance with Montana’s security deposit law. All receipts, communication, and other records regarding the security deposit should be kept in one location and easily accessible. Every transaction should be documented and every communication should be in writing, even if only sent via text or email. Conduct thorough move-in inspections and detailed inventories. Move-in inspections benefit both landlords and tenants. They help ensure there is agreement on the condition of the property, and they create a good faith basis of any disagreements once the tenancy is over. We recommend that all parties take an initial photo of all rooms prior to moving in and take still images and/or video of each room after moving in. Just as when a tenancy comes to an end, if the condition of a room is in dispute when moving in, we recommend that a third party inspect the property and document the condition through pictures and/or video, to ensure neutrality and objectivity. It is best to conduct all move-in inspections in front of the other party and, preferably, a third party as well. Both parties should also complete written inventories when moving in to document the condition of all fixtures, appliances, furniture, and other items or spaces on the property. The move-in inspection and inventory should include unoccupied rooms and spaces and document existing damage , dirt, stains, and other issues. Like the regular move-in inspection, we recommend that each party should try to conduct the initial move-in inspection and inventory in front of the other party and, preferably, a third party as well. Be specific in your notice to vacate. Whether the notice to vacate was required or voluntarily given, it is important that all parties are clear about the process. Addressing the notice to vacate to the correct party is important to ensure that the security deposit law is not violated. Additionally, it is important to be specific in the notice about which lease provisions and whether the property is being vacated after the expiration of the lease or terminated early. Communicate expectations clearly and often. Setting expectations from the beginning is always a good idea for landlords and tenants. Whether the terms are verbal or written, any really important information to the security deposit law should be shared in writing. In Montana, landlords and tenants are required to enter into written leases which contain certain information, such as the rent amount, the due date, the length of the tenancy, and many other details. A good habit to get into is to write down any informal agreements and to send these agreements to both parties in writing, regardless of whether the landlord is giving a credit to the tenant or the tenant is offering to make a repair. This will help eliminate misunderstandings and provide a good safeguard against improper deductions from the deposit.