Maine Landlord-Tenant Law: Understanding Security Deposit Interest
How Maine landlords can avoid "double-damage" penalties by managing deposits correctly
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In Maine, the answer to whether interest is required on security deposits depends entirely on the size of the rental operation. For the average small-scale landlord, the answer is generally no; however, Maine law establishes specific thresholds where the payment of interest becomes a legal mandate.
The General Rule for Most Landlords
Under the Maine Revised Statutes (specifically Title 14, §6038), most residential landlords are not required by state law to pay interest on security deposits. While they must adhere to strict rules regarding how the money is held, the state does not automatically require the "accrual and payout" of interest to the tenant.
That said, there is a critical distinction in Maine law between holding a deposit and paying interest on it. Even when interest isn't required, all landlords (excluding those in owner-occupied buildings with five or fewer units) must keep security deposits in a separate account at a bank or financial institution. This account must be beyond the reach of the landlord’s creditors, and the landlord must disclose the name of the institution and the account number if the tenant requests it in writing.
The "Five or More Units" Exception
The requirement for interest shifts once a landlord’s holdings reach a certain scale. In Maine, if a landlord owns five or more individual dwelling units, they are typically required to place security deposits into interest-bearing accounts. In these scenarios:
The deposit must earn interest at a rate at least equal to the rate of a standard savings account at the institution where it is held.
The interest earned on the deposit belongs to the tenant and must be returned to them at the end of the tenancy, along with the principal balance of the deposit.
Local Ordinances and Private Agreements
While state law provides the baseline, two other factors can change the interest requirement:
Written Lease Agreements: A landlord and tenant can voluntarily agree to an interest-bearing arrangement in their written lease. If the lease states that the tenant will receive interest on their deposit, that contract is legally binding regardless of how many units the landlord owns.
Municipal Laws: Some Maine cities, such as Portland, have historically implemented more stringent rental regulations. It is always wise for both parties to check local municipal codes to see if the city requires interest payments that exceed the state's requirements.
Penalties for Mishandling Deposits
If a landlord is legally required to pay interest and fails to do so—or fails to return the deposit within the required 21 days (for at-will tenancies) or 30 days (for written leases)—they may face significant penalties. Under Maine law, a tenant who successfully sues for a "wrongfully withheld" deposit can be awarded double the amount of the deposit, plus court costs and reasonable attorney’s fees.
Information published to or by The Industry Leader will never constitute legal, financial or business advice of any kind, nor should it ever be misconstrued or relied on as such. For individualized support for yourself or your business, we strongly encourage you to seek appropriate counsel.
