Vermont Security Deposit Laws in 2024

Vermont has specific laws governing security deposits that apply to most residential rental properties in the state. The purpose of this guide is to provide Vermont renters and landlords with a comprehensive overview of these regulations, best practices, and frequently asked questions relating to security deposits. 

Vermont's security deposit law is contained primarily within Title 9, Chapter 137 of state statutes. It covers security deposits for any residential rental unit, including apartments, houses, condos, and mobile homes. The law outlines the rights and responsibilities of both landlords and tenants when it comes to handling security deposits.

These laws apply to most landlord-tenant relationships in Vermont, with a few exceptions for owner-occupied units with less than 4 units, seasonal rentals, and long-term leases. The regulations cover topics like maximum allowable deposits, interest payments, return timelines, deductions, and dispute resolution. 

Some key aspects of Vermont's security deposit laws have seen changes in recent years. For example, the cap on maximum security deposits was lowered in 2017 from 3 months to 2 months rent. And the allowable deduction for carpet cleaning was eliminated in 2016. Renters and landlords should be aware of these updates when negotiating lease terms and handling security deposits.

Maximum Allowable Security Deposit

In Vermont, landlords are allowed to collect a security deposit from tenants when renting out a residential property. However, there are caps on the maximum amount that can be charged.

According to Vermont law, a landlord cannot require a security deposit in excess of one month's rent. For example, if the monthly rent is $1,000, the landlord can only collect up to $1,000 as a security deposit. They cannot require first and last month's rent plus a security deposit that exceeds one month's rent.

The security deposit cap applies per dwelling unit. So for a property with multiple units, the landlord can collect up to one month's rent for each separate unit. The law does not allow landlords to pool security deposits from multiple units.

The only exception is for long-term leases of more than one year. In those cases, the landlord can collect up to two month's rent as a security deposit. However, they would need to refund any amount over one month's rent at the end of the first year.

Landlords also cannot evade the security deposit cap by disguising it as other fees like a redecorating fee, damage deposit, pet deposit, etc. Those would be considered part of the overall security deposit subject to the one month's rent cap.

Interest Payments on Deposits

Vermont law requires landlords to pay interest on security deposits for lease terms greater than one year. The interest rate must be equal to the average rate paid by commercial banks for similar time periods. 

Landlords must pay accrued interest annually or provide the full interest payment when returning the security deposit. Interest is calculated from the date the deposit is made until it is returned to the tenant. 

For leases less than one year, landlords are not required to pay interest on security deposits in Vermont. However, some landlords choose to pay interest voluntarily even on short-term leases as an incentive for tenants.

If a landlord fails to pay interest as required, the tenant can recover up to twice the amount of interest due when bringing an action in court. Tenants should review their lease to determine if they are owed interest and can contact the landlord for clarification or payment.

Returning the Security Deposit

According to Vermont law, landlords must return a tenant's security deposit within 14 days after the tenant has fully vacated the rental unit. The tenant must also provide the landlord with a forwarding address in writing, otherwise the 14 day timeline does not apply.

When returning the security deposit, the landlord must also provide the tenant with a written itemized list of any deductions from the full deposit amount. Allowable deductions include:

• Unpaid rent
• Damage to the unit beyond normal wear and tear
• Costs of storing and disposing of any abandoned tenant property
• Utility bills or other charges left unpaid by the tenant

If no deductions are being made, the full security deposit amount must be returned. The landlord cannot make arbitrary deductions unrelated to the tenant's rental obligations.

If the landlord fails to return the deposit or provide an itemization within 14 days, they forfeit the right to make any deductions and must return the full deposit immediately. After 30 days, the tenant can take legal action against the landlord.

Tenants should thoroughly review the itemization and challenge any improper or ambiguous deductions. Normal wear and tear cannot be deducted, nor damage that existed prior to the tenant moving in. The burden of proof is on the landlord to show the tenant is responsible for alleged damages.

If disputes arise over deductions, tenants have the right to demand documentation and receipts for any repair costs deducted from the deposit. Alternatively, small claims court is an option for tenants to recover wrongfully withheld deposit money.

Normal Wear and Tear

Normal wear and tear refers to the natural deterioration of a rental property and its fixtures that occurs from normal usage over time. Landlords in Vermont cannot deduct costs to repair normal wear and tear from a tenant's security deposit.

Definition

Normal wear and tear is defined as the expected decline in condition that occurs through standard occupancy and use of a rental unit. Minor scuffs, faded paint or carpet, worn appliance seals, loose hinges on cabinet doors are common examples. Excessive damage that results from negligence, misuse or abuse by the tenant is not considered normal wear and tear.

Examples  

• Faded paint or carpet fibers, especially in high traffic areas or from sunlight exposure
• Light scuff marks on walls or floors
• Loose door handles or cabinet hinges
• Worn gaskets on fridge and oven doors
• Wood floors developing minor creaks or scratches
• Weathering of exterior surfaces from the elements

Landlord's Burden of Proof

The burden of proof falls on the landlord in Vermont to show that any damages exceed normal wear and tear. They must demonstrate how the tenant is responsible through negligence or intent. The landlord cannot make deductions from the security deposit for repairs of normal wear and tear.

Tenant's Obligations

When a tenant is preparing to move out at the end of a lease, they have certain obligations they must fulfill to ensure the proper return of their security deposit.

Proper Notice  

Tenants in Vermont are required to provide their landlord with proper written notice before moving out, as specified in the lease agreement. Typically this is 30 days or one full rental period in advance. Giving proper notice allows the landlord time to prepare the unit for new tenants.

Leave Unit Clean

Tenants are expected to thoroughly clean the rental unit before moving out. This includes:

• Removing all possessions and trash
• Cleaning all rooms, appliances, fixtures, windows, etc.  
• Ensuring the unit is 'broom clean'

Tenants should take before/after photos and do a walkthrough with the landlord to demonstrate the clean condition.

Provide Forwarding Address  

It is critical that tenants provide the landlord with a forwarding address when they move out. Otherwise the landlord has no way to return the security deposit within the required 14 days. The forwarding address should be included with the written move-out notice.

Landlord Obligations

Landlords in Vermont have several key obligations when it comes to security deposits:

Timely Return of Deposit

Vermont law requires landlords to return a tenant's full security deposit within 14 days after the tenant has moved out of the rental unit. This 14 day window begins once the tenant has provided the landlord with their new address in writing. If a landlord cannot meet this 14 day deadline, they must notify the tenant in writing and provide a specific date when the deposit will be returned.

Written Itemization of Deductions   

If a landlord retains any portion of the security deposit for damages, cleaning, or unpaid rent, they must provide the tenant with a written list itemizing all deductions from the deposit. This itemized statement must be sent to the tenant along with the balance of the deposit within 14 days. Landlords cannot make vague or generalized deductions - all deductions must be specifically listed and described.

Maintain Security Deposit Records

Landlords in Vermont must keep detailed records relating to each tenant's security deposit. This includes documentation showing the amount of the original deposit, any accrued interest payments, the basis for retaining deposit funds, and copies of written notices provided to tenants. Landlords must maintain these records for at least 3 years after the tenancy ends.

Rental Agreements

Security Deposit Clause Requirements

Vermont law requires landlords to include specific details about the security deposit in the rental agreement. This includes the amount of the deposit, a statement that the deposit will be held in an escrow account, and the terms under which the deposit may be withheld by the landlord. The rental agreement should clearly state the landlord's responsibilities, like providing a written itemization of damages and returning any unused portion of the deposit.

Prohibited Rental Agreement Terms

While landlords have discretion over the terms in their rental agreements, Vermont prohibits rental contracts from containing certain clauses that violate tenants' rights. It is illegal for agreements to state the landlord can use the security deposit for normal wear and tear or routine maintenance. Agreements cannot waive the tenant's right to receive interest payments on the deposit or to dispute improper withholdings. Any ambiguous clauses meant to allow the landlord to unreasonably keep the deposit are also prohibited.

Local Ordinances  

Some cities and towns in Vermont have additional ordinances that govern security deposits for rentals in their jurisdictions. Two notable examples are Burlington and Brattleboro.

Burlington

The city of Burlington has adopted a Rental Housing Code that includes provisions for security deposits that differ from state law. Key aspects include:

• Maximum security deposit is equal to 1 month's rent for an unfurnished unit, or 2 month's rent for a furnished unit. This lower cap overrides the state's 2 month limit.
• Landlords must pay 5% annual interest on security deposits held over one year.
• Deposits must be placed in a Vermont bank, credit union or savings and loan association.
• Tenants must be given an itemized list of damages and deposit deductions within 14 days of vacating.
• Disputes may be heard by the Burlington Housing Board of Review.

Brattleboro  

Brattleboro also has a Rental Housing Safety ordinance with security deposit regulations including:

• Security deposits are limited to 1 month's rent.
• Landlords must provide interest payments on deposits annually at a minimum rate set by the town. 
• Tenants can request an inspection within 5 days of vacating to review potential deposit deductions.
• The Rental Housing Board of Appeals handles complaints and disputes over deposit returns.

So tenants and landlords in Burlington and Brattleboro should be aware the local ordinances may provide additional protections and requirements beyond the state laws.

Frequently Asked Questions

How long does a landlord have to return a security deposit in Vermont?

In Vermont, landlords have up to 14 days after the termination of tenancy or the tenant vacating the property, whichever is later, to return the security deposit. The landlord must provide an itemized statement of any deductions for damages beyond normal wear and tear.

Is it legal to charge first, last, and security in Vermont?

Yes, in Vermont, it is legal for landlords to charge first month's rent, last month's rent, and a security deposit at the beginning of a tenancy. However, the total of the security deposit should not exceed more than two months' rent.

What is considered normal wear and tear in Vermont?

Normal wear and tear in Vermont includes minor issues that occur naturally over time, such as faded paint, worn carpets, loose door handles, and small nail holes in walls. It does not include damage from negligence, abuse, or accidents by the tenant, such as large holes in the walls, broken windows, or significant stains on flooring.

What is the security deposit law in Burlington, VT?

In Burlington, Vermont, the security deposit law is similar to the state law, where the deposit should not exceed two months' rent. Additionally, Burlington landlords must place the security deposit in a separate interest-bearing account and return it with interest, minus any lawful deductions, within 14 days of the tenant vacating the property.

How much notice does a landlord have to give a tenant to move out in Vermont?

In Vermont, the amount of notice required depends on the type of tenancy. For a month-to-month tenancy, the landlord must provide at least 60 days' notice if the tenant has resided in the unit for two years or less, or 90 days' notice if the tenancy has lasted more than two years. For fixed-term leases, typically, the lease must naturally expire unless there is a breach of lease terms.

What are the obligations of a landlord in Vermont?

Landlords in Vermont are obligated to maintain the rental property in a habitable condition, comply with all health and safety laws, make necessary repairs promptly, and provide notice before entering the rental property (except in emergencies). Landlords must also adhere to the agreed lease terms and respect the tenant's right to quiet enjoyment of the property.