SENATE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 2846

The Commonwealth of Massachusetts

_______________

In the One Hundred and Ninety-Third General Court
(2023-2024)

_______________

by adding the following section:-

"SECTION XX.  Section 15B of chapter 186 of the General Laws, as appearing in the 2018 Official Edition, is hereby amended in subsection (b) of subsection (1) by inserting after the words “subsection (2)” in line 25 the following:-

provided however, in lieu of requiring payment of a security deposit a lessor may choose to collect and a tenant may choose to pay a fee in lieu of security deposit, the payment of which satisfies the lessor’s security deposit requirement and the tenant’s security deposit obligation.

The fee in lieu of security deposit:

(a) may be entirely or partially non-refundable, so long as this is disclosed in the lease and separately acknowledged by the tenant;

(b) must be utilized by the lessor to purchase insurance coverage for unpaid rent or unit damage, provided that a lessor may not charge a fee that is more than the reasonable cost of obtaining and administering such insurance;

(c) may be a recurring monthly fee, or payable upon any schedule and in any amount that the lessor and tenant choose; and

(d) shall not be considered by a court, arbitrator, mediator or any other dispute resolution adjudicator to be a security deposit or governed by state or local codes governing security deposits.

If a lessor chooses to waive a security deposit requirement and a tenant agrees instead to pay a fee in lieu of a security deposit, the lessor shall:

(a) ensure that the fee in lieu of a security deposit is strictly optional for the tenant, and the tenant can choose to pay a full security deposit rather than a fee in lieu of a security deposit;

(b) not use a prospective tenant’s choice to pay a fee in lieu of a security deposit or a traditional security deposit as a criterion in the determination of whether to approve an application for occupancy;

(c) if it chooses to offer the fee in lieu of a security deposit option, offer it to every prospective tenant whose application for occupancy has been approved, without further regard to income, race, gender, disability, sexual orientation, immigration status, size of household, or credit score following such approval,

(d) not charge tenant for normal wear and tear;

(e) allow any tenant that agrees to pay a fee in lieu of a security deposit, to opt-out of the continuing fee in lieu of a security deposit obligation upon full payment of the security deposit that is otherwise in effect for the tenant’s apartment on the day of the opt-out.

Should the tenant choose to pay a fee in lieu of a security deposit, an agreement to collect the fee must be in writing and signed by both the lessor or the lessor’s legal representative, disclosing:

(a) that the fee is only to waive the required security deposit upon move-in;

(b) if the fee is nonrefundable;

(c) that the fee does not eliminate any lease obligations, including rent and tenant liability for damages beyond wear and tear;

(d) it does not provide insurance or any coverage for the tenant.

(e) The terms of any insurance coverage purchased by the lessor for lessor's losses associated with any unpaid amounts due from the tenant to the lessor pursuant to the lease, including but not  limited to rent, fees, or unit damage in excess of wear resulting  from ordinary use of the premises, and including the amount of exclusions or caps, if any, on coverage of any amounts due from the tenant to the lessor pursuant to the lease;

(f) If the insurance provider requires the lessor to first attempt reimbursement from the tenant before filing a claim, that payment of the fee in lieu of a security deposit does not preclude the insurer or the lessor from proceeding against the tenant to recover any unpaid amounts due to the lessor pursuant to the lease and unpaid costs to repair damage to the property for which the tenant is responsible pursuant to the lease but never to include any sums for wear resulting from ordinary use of the premises, together with reasonable attorneys' fees.

(g) Such disclosures to the tenant must be in substantially the following form:

YOU MAY PAY A MONTHLY FEE INSTEAD OF A SECURITY DEPOSIT.

This fee is not a security deposit and will not be refunded when you move. By paying this fee the lessor is permitting you to move into the housing unit without paying a security deposit. If you do not make all payments or you damage the premises beyond wear resulting from its ordinary use, you may be required by the lessor, an insurance company, or a debt collector to pay the unpaid amounts, including costs of repairing the damages in excess of wear resulting from ordinary use of the premises.

Massachusetts law may allow you two different options: (1) Paying the full security deposit upon signing the lease. (2) If offered by your lessor, paying a monthly fee in lieu of security deposit instead of a security deposit. If you choose this option, you will not pay a security deposit. Your recurring monthly charge will be $____ IN ADDITION to your monthly rent payment, instead of a security deposit in the amount of $____.

IF YOU CHOOSE TO PAY A MONTHLY FEE IN LIEU OF SECURITY DEPOSIT, HERE IS THE AMOUNT YOU WILL PAY OVER THE LEASE TERM COMPARED TO THE ONE-TIME DEPOSIT PAYMENT:

Monthly Nonrefundable Fee in Lieu of Security Deposit:

Total cost of monthly fees over lease term:

One-time Refundable Security Deposit:

In the event your tenancy terminates and you have not paid rent or other amounts due pursuant to the lease, and you have not paid to repair damages beyond wear resulting from ordinary use of the premises, insurance coverage will pay your lessor up to: $_________ for any unpaid rent and fees, and  $___________ for any damages.

Total coverage: $________________

IMPORTANT: IF YOU CHOOSE TO PAY A RECURRING MONTHLY FEE INSTEAD OF A SECURITY DEPOSIT:

(1) YOU ARE NOT AN INSURED PARTY UNDER THE INSURANCE POLICY 25 PURCHASED BY THE LESSOR USING YOUR FEES;

(2) YOU ARE NOT A BENEFICIARY TO ANY INSURANCE COVERAGE OR ANY INSURANCE BENEFITS UNDER THE INSURANCE POLICY THAT THE LESSOR PURCHASES USING YOUR FEES; AND

(3) YOU ARE STILL OBLIGATED TO PAY RENT AND ALL PAYMENTS REQUIRED 30 BY THE LEASE, INCLUDING COSTS TO REPAIR DAMAGES BEYOND WEAR 31 RESULTING FROM ORDINARY USE OF THE PREMISES.

The lessor may seek payment from you before filing any claims with the insurance provider. If you fail to pay the lessor for unpaid rent or other unpaid payments or the costs to repair damages beyond wear resulting from ordinary use of the premises, and an insurer pays the lessor instead, then the insurer may seek reimbursement from you of its payments to the lessor.

If you choose to pay a recurring monthly fee instead of a security deposit, then you are permitted at any time to pay the lessor a security deposit in the amount of $__________ and stop paying the recurring fee beginning in the month following payment of the security deposit.

(h) The lessor shall provide the disclosure form to the tenant with any lease and renewal that includes the option to pay a fee instead of a security deposit.

(i) A fee in lieu of a security deposit does not constitute rent and and failure to pay may not constitute a cause for eviction provided that nothing in this section shall preclude the lessor from proceeding in a civil action against, and the lessor shall have the right to proceed against, a tenant to recover unpaid fees

(j) In the event the lessor fails to purchase or maintain the insurance as required by this subsection, and if the tenant pays the monthly fee as agreed, the lessor shall credit the total insurance coverage stated in the disclosure to any indebtedness owed by the tenant upon the tenant vacating the unit.

However, if through no fault of the lessor, the insurer is suddenly unable to do business in Massachusetts or is otherwise incapable of fulfilling its obligation, the lessor is not required to credit the insurance coverage stated in the disclosure to any indebtedness owed by the tenant upon the tenant vacating the unit. If the landlord fails to secure Additional coverage after 60 days, the landlord may no longer charge a fee in lieu of security deposit and is not required to credit the insurance coverage stated in the disclosure to any indebtedness owed by the tenant upon the tenant vacating the unit; and may not charge the tenant a security deposit during the lease term.

k) If at the end of the lease term, a landlord and tenant wish to renew a lease but

The landlord decides to discontinue providing the option of paying a fee in lieu of a

Security deposit, the landlord shall: provide 60 days notice to the tenant prior to end of the lease term; and reduce the security deposit required on the renewed lease by the amount of

A tenant's previous fee payments in lieu of the security deposit.

l) Lessor must notify a tenant upon termination of the lease of any damages and unpaid rent charges at least 30 days before submitting said charges to the insurer, and notice must include a written description and itemized list of all damages and unpaid rent.

Should the lessor or court find that a tenant is not liable for a charge, the lessor is prohibited from submitting to insurer, or pre-judgement submissions to insurer must be withdrawn.

If an insurer compensates a lessor for a valid claim associated with the lessor's losses pursuant to the lease, including but not limited to rent, fees, or unit damage in excess of wear resulting from ordinary use of the premises:

a) The lessor may not seek reimbursement of the amounts from the tenant that the insurer paid to the lessor;

b) In the event the insurer has subrogation rights, the insurer may seek reimbursement from the tenant but only for the amounts paid to the lessor that were owed by the tenant to the lessor pursuant to the lease, and in no circumstances for amounts, if any, paid to the lessor for repair of wear resulting from ordinary use of the premises; and

c) The tenant is entitled to any defenses to payment against the insurer as against the lessor

If the insurer or any other collector seeks reimbursement from the tenant pursuant to any subrogation rights available to the insurer, with any request for reimbursement, the party must provide the tenant by first-class mail, and email if available, at the last known address as provided by the lessor:

(a) evidence of damages or unpaid rent that the lessor submitted to the insurer;

(b) evidence of damage repair costs that the lessor submitted to the insurer; and

(c) a copy of the settled claim that documents payments made by the insurer to the lessor.  A tenant is entitled to any defenses to payment against the insurer as against the lessor;

(d) Information about how to contact the insurer or collector seeking reimbursement to dispute any claim

If the tenant fails to pay a request by an insurer or collector for reimbursement under this subsection, the party seeking reimbursement may not commence collection activities against the tenant less than 60 days after sending a request for reimbursement and providing documentation as required under this subsection. However, if the tenant has disputed the claim, the party seeking reimbursement shall defer any collection activities for an additional 60 days to resolve the dispute.

The lessor may not send an invoice to a tenant or undertake collection activity against the tenant for any amounts after submitting a claim to the insurer if:

(a) The insurer approved the claim;

(b) The insurer denied the claim because it is not a loss pursuant to the lease; or

(c) The insurer denied the claim because the lessor submitted insufficient documentation or proof to substantiate the claim.

(d) the lessor may invoice the tenant and undertake collection activity against a tenant for lessor's losses if the insurer denies the claim because the loss is not covered pursuant to the insurance agreement, including if the value of the loss exceeded the insurance coverage loss limit.

Where the tenant has opted into paying a fee in lieu of a security deposit, the lessor shall not undertake collection activities against the tenant unless 60 days have passed after the lessor has submitted a claim to the insurer. However, nothing in this subsection shall be construed to prohibit the lessor from sending an invoice to the tenant before submitting a claim to the insurer.

(a) However, the 60-day waiting period shall not apply where the tenant opts out of, or the lessor discontinues providing the option of, paying a continuing fee in lieu of a security deposit during the tenancy and the tenant provides full payment of a security deposit prior to the termination of the rental agreement or the tenant's abandonment of the premises.

A lessor found in material violation of this act shall be held liable to the tenant in a civil action up to two times the monthly rent of the real property unit at issue, as well as court or arbitration costs and reasonable attorneys' fees"