Big changes in store for Philadelphia landlords! A new Security Deposit Installment Law takes effect December 2, 2025 and it is reshaping how deposits are collected across the city. This is far from a legislative footnote, the new law is part of a broader initiative the city has put forth called the “Move-In Affordability Plan”. City leaders continue to push to make renting more affordable and accessible by breaking up the hefty upfront costs that have traditionally overburdened tenants.
For landlords, though, this means new rules, new processes, and some new risks.
Whether you’re renting out a couple of duplexes or overseeing a massive portfolio, understanding exactly what the Security Deposit Installment Law requires is a must. The reality of getting it wrong could land you in legal hot water, and the compliance deadline is upon us. Today, we’ll walk you through what’s changing, what you’re responsible for, and what it could mean going forward. Let’s get started!
Key Takeaways
- Starting December 2, 2025, Philadelphia landlords who own or manage 3+ units must offer installment payments for any security deposit over 1 months’ rent.
- The new Security Deposit Installment Law does not change how much a landlord can charge per state limits, only how the deposit can be collected.
- Noncompliance may be deemed an “Unfair Rental Practice”, threatening landlords with statutory damages up to one month’s rent plus attorney’s fees and court costs.
- Landlords must update administrative and operational processes to protect themselves against delayed cash flow, missed payments, or compliance disputes.
What is the Security Deposit Installment Law in Philadelphia?
As part of the Move-In Affordability Plan, the Security Deposit Installment Law introduced by city council amends Chapter 9-800 of The Philadelphia Code. It establishes new requirements and changes the structure of how landlords collect security deposits for residential rentals. As experienced property managers in Philadelphia, we’ve seen firsthand the impact housing affordability has had on the local market. Under the new Security Deposit Installment Law, the high upfront costs of moving can be spread into payments. Thus, helping to lower the burden many tenants face when relocating.
The ordinance, Bill No. 250044-A, was signed into law back in September, meaning it officially becomes effective 90 days later.
Landlords must comply with the new law for any new lease or lease renewal beginning December 2, 2025.
What the Security Deposit Installment Law Means for Landlords?
What the Security Deposit Installment Law Means for Landlords?In short, if the security deposit exceeds one month’s rent, tenants must be offered an installment plan. If the total deposit is less than or equal to one month’s rent, that remains one lump sum collected upfront. It can get a bit confusing, so here is how that may break down for tenants and landlords –
- Deposit ≤ 1 Month’s Rent = Landlord may collect a lump sum.
- Deposit ≥ 1 Month’s Rent = Tenant must be given 2 payment options.
For tenants, these options include paying a lump sum upfront if they choose or pay in installments. If they choose installments, it translates to the following –
- Security Deposit Installment Plan = 1 Month Upfront + Remaining Balance broken up equally over 3 monthly installments due no more regularly than once a month, starting the month after the initiation of the tenancy.
It’s important to note that even with an installment plan option, the total amount charged doesn’t change. You can’t decide how much a tenant is required to pay based on the method of payment they choose and deposit limits must still comply with all relevant state laws under 68 P.S. § 250.511a.
Under 68 P.S. § 250.511a, the state of Pennsylvania puts limits on how much security deposit a landlord can collect. During the first year, it is up to two months’ rent. But in the second year, landlords can hold no more than one month’s rent. Once a tenant passes the one-year mark, any excess deposit must be returned so the total held does not exceed the one-month maximum.
Does the New Law Apply to All Landlords?
No. If you own or manage two or fewer units, you are exempt from the new ordinance. However, when determining the total number of units, properties held under different entities must be counted together if they’re ultimately controlled by the same individual or group. So, that is important to keep in mind when determining what ultimately applies to your situation.
That said, if you fall into the group managing 3 or more units – now is the time to update your processes! It’s critical to update your lease to include installment options whenever the deposit requested is greater than one months rent. Clearly lay out the schedule and amounts of the installment payments and be sure to issue receipts for all payments to avoid disputes.
What If Landlords Do Not Comply with the Security Deposit Installment Law?
As trusted property managers in the industry, we have always encouraged property owners and self-managing landlords to stay up to date on changing law. The truth is that if you do something wrong, ignorance is not a defense, and non-compliance can cost landlords thousands in legal fees.
If you fall in the category this new Security Deposit Installment Law applies to and you do not honor the terms — that could be considered Unfair Rental Practice. In other words … big trouble. Tenants could pursue legal action to recoup damages up to one month’s rent but it doesn’t end there. Courts often award attorney and court fees in instances where the landlord was negligent.
So, in short, beginning December 2nd, compliance is not an option if you own or manage 3 or more properties.
Urgent Operational Changes & Risks for Landlords
As we already mentioned, updating your lease structure to reflect the new installment options is priority number one as this change goes into effect this week. But that isn’t the only operational shift –
Added Administrative Burden
When new ordinances require updates to leases, paperwork, payment tracking, and processes — someone has to do that. Whether that is your burden or you employ administrative help, it’s extra work to set-up and to track on a continuous basis.
Be Ready for Delayed Cash Flow
No longer can you count on upfront lump sums which impacts landlords who rely on that deposit for move-in readiness. Another factor to the new legislation is city council’s plan to limit “junk fees”. That includes capping other fees besides the deposit at a lower threshold such as rental application costs. All of which can impact a landlord’s bottom line.
Risk of Non-Payment
When collecting the deposit upfront, you know it is secure. So, under the new plan, what if a tenant misses an installment? This is where it can get tricky. The installment schedule is part of the lease terms, so if a tenant misses an installment or fails to pay altogether, it is a lease violation. Therefore, landlords may need to issue a late fee or notice of non-payment.
How Landlords Can Best Deal with the Changes
Changing laws mean changing processes and in some cases, a realignment of business practices. That said, preparation and knowledge are key to making a smooth and compliant transition for all parties involved. Here are a few of our tips and best practices to navigate this change –
- Review Your Paperwork – We’ve mentioned the effective date of December 2, 2025, several times, but if your current lease templates don’t reflect the installment option for deposits greater than 1 month rent— fix it now!
- Screen with Diligence – Whether tenants choose an installment plan or pay upfront, consistent screening is the backbone of any successful rental. Keep your criteria transparent, consistent, and stringent across all applications to reduce the risk of non-payment in the future.
- Communicate Upfront – Transparency and communication go a long way in the landlord-tenant relationship. Be upfront with prospective tenants and explain any available payment choices, due dates, and obligations.
- Maximize Technology – More payments, more paperwork, more receipts all equal more tracking. Gone are the days when paper records are enough, so implement property-management software or ledger systems to track installment payments, issue receipts, and flag missed payments. We hope you never run into a dispute, but it does happen and clear records often mean the difference between winning or losing your claim.
- Plan for Contingency – With delays in cashflow, potentially lower fees, and added administrative cost — plan ahead! Set aside contingency funds when prepping units so unexpected delays don’t kill your cash flow.
Where Do You Go from Here & How BMG Can Help?
Philadelphia’s new Security Deposit Installment Law signals the city’s commitment to affordability and leveling the playing field for renters. It aims to reduce the initial move-in burden that holds many renters back from moving and in some cases, has kept them from entering the market entirely. How will this work out for landlords in the long run? That remains to be seen.
One thing is for sure, keeping up with changing laws and regulations is tough when you are tackling everything on your own. One simple mistake or careless oversight can land you in legal hot water. So, how do you mitigate the risk?
At Bay Property Management Group, our team of experienced managers and support staff handle the day-to-day operations that help owners remain compliant. Our services bridge the gap between owner interests and tenant needs, ensuring both parties have a successful rental experience. If you are worried about the changing rental landscape in Philadelphia, or are looking for a way to lighten your stress managing alone — we can help!
Reach out to us today for a FREE No Obligation Rental Analysis!
New Security Deposit Installment Law FAQ
Q: What does the law require?
A: When a landlord who owns or manages 3 or more rental units’ charges more than one month’s rent as a security deposit, they must offer the tenant a choice. The specifics under § 9-804 (“(4) Security deposits”), state that when the required security deposit exceeds one month’s rent, landlords must give tenants the choice of a lump sum or installments. An installment option equals one month’s rent up front, and the remainder in three equal monthly payments starting the month after tenancy begins.
Q: Who must comply?
Q: Who must comply?A: The new Security Deposit Installment Law applies only to landlords or property owners who operate or manage 3 or more units. Owners with 2 or fewer rental units are currently exempt from the installment requirement. However, when determining the total number of units, properties held under different entities must be counted together if they’re ultimately controlled by the same individual or group.
Q: What if the security deposit is equal to (or less than) one month’s rent?
A: The installment option only applies to deposits greater than 1 months’ rent. Landlords may still collect a lump sum if the security deposit is equal to or less than one month’s rent.
Q: When does the law take effect?
A: Signed on September 2025, the new Security Deposit Installment ordinance becomes effective for leases executed or renewed on or after December 2, 2025.
Q: What happens if a landlord doesn’t comply? What are the penalties?
A: Noncompliance is a violation of the law and considered “unfair rental practices.” Tenants could sue and may recover actual damages or choose statutory damages equal to one month’s rent. In addition, courts may award reasonable attorney’s fees and costs. In other words, non-compliance carries real financial and legal risk to landlords.
Q: Does the law change how much security deposit a landlord may charge?
A: No. The new Security Deposit Installment Law changes how deposits are collected, not how much the deposit is. Landlords must still abide by all existing state laws. Specifically, the Pennsylvania Landlord and Tenant Act, which limits deposits to a maximum of 2 months’ rent in the first year, and one month’s rent in subsequent years.
Q: Does the law also affect application fees or other move-in fees?
A: Sort of. The city’s Move-In Affordability Plan takes aim at broader landlord fees. Under a different bill, the plan includes a provision to limit application fees by capping them to a set amount. This would also limit how often landlords can charge them for the same applicant. However, this is not included under the Security Deposit Installment Law.
Q: Does the installment requirement apply to renewals or only new leases?
A: The requirement applies to “any residential lease executed or renewed on or after” December 2, 2025. Meaning it affects both new leases and renewals.
Q: What if part of the deposit is considered “last month’s rent” or some other upfront cost?
A: According to state regulations and local interpretation, “last month’s rent” is typically treated the same as a security deposit for compliance purposes. That means if your upfront charges—security deposit plus any “last month’s rent” requirement—total more than one month’s rent, and you manage 3 or more units, you will be required to offer the installment payment option.
