Pennsylvania Security Deposit Laws for Landlords

Pennsylvania lets you hold up to two months' rent as a security deposit during the first year of a lease and no more than one month's rent from the second year on, so you return the excess when year two begins. Once you have held a deposit of more than $100 for two years, it must sit in an escrow account at a regulated bank (or be covered by a bond), and the tenant earns the interest minus a 1 percent fee. At move-out you have 30 days to send a written list of damages and pay the balance; skip the list and you lose the right to keep any of the deposit for damage, and keeping more than the actual damage costs you double the excess.

How much can you collect?

The cap in the Landlord and Tenant Act of 1951, section 511.1 (68 P.S. section 250.511a), depends on how long the tenancy has run. The cap covers money held for damage to the unit and for unpaid rent, whatever you call it, and a tenant cannot waive it.

Example: rent is $1,500 and you took a $3,000 deposit at signing. When the second lease year starts, the cap falls to $1,500, so return $1,500 to the tenant. If rent rises to $1,575 at a renewal in year three, you may ask the tenant to top the deposit up to $1,575. After the tenant has lived there five years, a rent increase cannot come with a larger deposit.

Put the deposit amount, what it secures, and the anniversary date in the lease. Our guide to Pennsylvania lease required provisions covers the rest of the form.

Philadelphia installment rule

For leases signed or renewed after September 3, 2025, a Philadelphia ordinance in effect since December 2, 2025, requires a landlord that asks for more than one month's rent as a first-year deposit to let the tenant choose to pay one month's rent up front and the rest in three equal payments. The payments start the month after the tenancy begins, can be due no more than once a month, and cannot raise the total. Landlords that own, operate, or manage 2 or fewer rental units are exempt, counting units held through all related entities together. The ordinance also bars charging more than the state cap or unlawfully keeping a deposit, and a tenant who sues over a violation can recover actual damages or, if the tenant chooses before judgment, one month's rent, plus attorney's fees and costs if the court awards them.

When must the deposit go into escrow, and when do you owe interest?

Section 511.2 applies once you have held a deposit for two years. From then on, for a deposit of more than $100:

1. Keep it in an interest-bearing escrow account at a federally or state-regulated bank or other institution.
2. Tell the tenant in writing the name and address of the institution and the amount on deposit.
3. Pay the tenant the interest the account earns, minus an administrative fee you may keep of 1 percent per year of the deposit. Pay it each year on the anniversary of the date the lease began.

Example: a $1,500 deposit in an account paying 2.5 percent earns $37.50 in a year. You keep 1 percent of $1,500, or $15, and pay the tenant $22.50. If the account pays 1 percent or less, the fee can absorb all of the interest.

Instead of an escrow account, you may guarantee the deposit and its interest with a bond from a bonding company authorized to do business in Pennsylvania. Interest not yet paid is part of what you settle at move-out. For how other states treat where deposits are held, see how to store security deposits.

What must you send within 30 days of move-out?

Under section 512 (68 P.S. section 250.512), your 30 days run from the end of the lease or from your acceptance of the tenant's surrender of the unit, whichever comes first. By then, give the tenant:

• A written list of damages to the unit that you say the tenant is responsible for.
• Payment of the difference between the deposit, plus any unpaid interest, and the actual cost of that damage.

Normal wear and tear is not damage. Base each item on a comparison with the unit's condition at move-in, which is why a dated record at the start matters; see whether a move-in inspection is required. If the tenant sues, you carry the burden of proving the actual damage. For the charges landlords most often apply, see what security deposits are usually used for.

Section 512 also says it does not stop you from keeping the deposit for unpaid rent or for breach of another lease term. List unpaid rent on the same 30-day notice so the tenant sees every deduction at once. If a tenant still owes rent after the deposit is applied, or has not left, the Pennsylvania eviction process covers recovering possession.

The tenant's forwarding address matters. A tenant who does not give you a new address in writing when the lease ends or when you accept the surrender relieves you of any liability under section 512, which includes both penalties below. Ask for it in writing at move-out and keep a copy.

What happens if you miss the deadline or keep too much?

Example: the deposit is $1,500 and the tenant owes no rent. You send a damage list on day 20 but keep the full deposit, and a judge finds $400 of actual damage. The deposit exceeded the damage by $1,100, so you owe the tenant double that amount, $2,200.

The forfeiture bars a suit for damage to the unit, not a suit for unpaid rent. Any lease clause that waives these protections is void.

Outside Philadelphia, a tenant can file a deposit claim with the local magisterial district judge, who hears civil claims up to $12,000. Philadelphia tenants file in the Municipal Court's Civil Division, whose small claims limit is also $12,000.

What if you buy a building with tenants in it?

The Landlord and Tenant Act has no section on transferring deposits when a rental is sold, so settle it in the purchase agreement. Before closing, get a written list from the seller of each tenant's deposit amount, the date it was paid, where it is held, and any interest owed, and confirm the figures with each tenant. Then have the seller transfer the funds to you or credit them at closing.

Check each deposit against the cap. A first-year deposit of two months' rent that is about to reach its second lease year will need the excess returned soon after you take over, and any deposit over $100 that has been held for two years already needs escrow and annual interest. Our guide on buying a currently occupied rental lists the other leases, records, and notices to collect.