An act relating to security deposits
H.565 would change Vermont law governing security deposits for residential rentals and mobile home parks. For standard rental housing, it would cap a landlord’s security deposit at an amount equal to three months’ rent and require the deposit to be held in an interest-bearing account for the tenant’s benefit. The bill makes the same changes for mobile home park leases, capping deposits at three months’ lot rent and requiring interest-bearing accounts for leaseholders.
The bill also preserves and clarifies local authority. Municipalities could continue to adopt ordinances on security deposits, so long as those ordinances are supplemental to state law and do not conflict with the minimum protections in the bill. Local ordinances could authorize interest payments and create a process for housing boards of review to hear security-deposit disputes, but they could not change how deposits are held.
A transition provision would allow landlords and mobile home park owners to keep security deposits above the new cap if the rental agreement or lot lease was already in effect before July 1, 2026. It would also require any security deposits collected before that date to be moved into interest-bearing accounts within 30 days after July 1, 2026. The act would take effect on July 1, 2026.
Because there are no committee transcripts or recorded votes provided, there is no documented legislative debate or vote history to indicate support or opposition. Based on the bill text alone, the measure appears aimed at strengthening tenant and leaseholder protections by limiting upfront deposit amounts and ensuring deposits earn interest, while also preserving some flexibility for municipalities.
The bill would amend 9 V.S.A. § 4461 and 10 V.S.A. § 6244, the state statutes governing security deposits for residential tenancies and mobile home park occupancy. It would impose a statewide maximum security deposit equal to three months’ rent or lot rent, require deposits to be held in interest-bearing accounts, and clarify that accrued interest does not count toward the cap. It would also preserve municipal authority to adopt supplemental ordinances and dispute-resolution procedures, subject to the state minimum standards. The transition rule would affect existing leases and require prompt compliance for deposits collected before the effective date.
No committee discussion or voting record was provided, so the bill’s sentiment cannot be measured from legislative debate. The introduced text suggests a consumer-protection orientation, with the primary policy goal of reducing large upfront housing costs and ensuring tenants and mobile home leaseholders benefit from interest on deposits. In the absence of recorded opposition or support, the bill appears neutral-to-favorable on its face from a tenant-rights perspective, while imposing new compliance requirements on landlords and mobile home park owners.
The main potential point of contention is the balance between tenant protections and landlord/park-owner flexibility. Supporters would likely favor the cap on security deposits and the requirement that deposits earn interest, arguing these measures reduce barriers to housing and protect renters’ funds. Opponents might object that a three-month cap is still substantial but could be too restrictive in some markets, and that mandatory interest-bearing accounts add administrative burden. A secondary issue is the bill’s treatment of local ordinances: municipalities may supplement state law, but they cannot alter how deposits are held, which could be seen either as a useful statewide floor or as a limit on local control.