Philadelphia Security Deposit Installments: Landlord Compliance Checklist

Philadelphia landlords are staring at a fundamental shift in how move-ins work. With Bill No. 250044-A amending Chapter 9-800, any security deposit above one month’s rent must come with an installment option. This takes effect on December 2, 2025.

That means new lease language, cleaner accounting, and more explicit conversations at the leasing table. Done right, you lower move-in friction without losing protection. Miss it, and you invite disputes and penalties.

Read on to see exactly what to change, what to keep, and how to stay ahead.

What the New Rule Means

If you ask for more than one month’s rent as a security deposit, your tenant gets a choice. They can pay the whole amount at once, or pay one month at lease signing and the rest in three equal monthly payments starting the next month.

The total deposit stays the same, no matter which option they pick. Ignoring this rule can cost you one month’s rent in damages plus the tenant’s attorney fees. Put this option in every lease and train staff to explain it clearly.

Small Landlord Exemption

If you own two or fewer rental units, this rule doesn’t apply. Count every unit you control, even those held in different LLCs or co-owned with partners. If your total reaches three or more, you must follow the installment rule. Review your count before each new lease.

How Does This Work with Pennsylvania Law?

Pennsylvania sets the baseline for security deposits statewide. It tells you how much you can collect: up to two months’ rent in the first year, then only one month after the first anniversary.

Philadelphia doesn’t change those limits. Instead, the City adds a collection rule for the first year: if you charge more than one month, the tenant must be offered an installment plan. Because state law sets the ceiling and city law sets the method, you must follow both at the same time.

Treat the installments as part of the security deposit (not rent), so rent late fees do not apply. Update your lease to include the tenant’s choice, the payment schedule, and what happens if an installment is missed.

Compliance Checklist

Update leases. Add a tenant choice clause that mirrors the ordinance, one month up front and three equal installments thereafter, and specify notice and cure for missed installments.
Configure accounting. Use separate ledger lines (e.g., “Security Deposit Installment 1/2/3”) to prevent misapplication as rent.
Confirm exemption status. Aggregate units across all ownership interests and keep dated documentation.
Align screening. Maintain rigorous but lawful criteria under the Renters’ Access Act; use written standards and proper notices.
Train the team. Issue a one-page SOP on timing, exemptions, documentation, and applicant communications.

Practical Tips for Smooth Compliance

Label payments as “Security Deposit Installment,” not rent, and do not apply rent late fees. For renewals that start after December 2, 2025, any deposit of more than one month should follow the installment plan.

Recount your total units each quarter to avoid accidentally losing the small landlord exemption. Itemize installments on separate invoices and reconcile monthly.

FAQ

Does this apply to current leases?
It applies to leases executed or renewed on or after September 3, 2025. The law is effective December 2, 2025. Build the option into all new and renewed leases from September 3 forward.

Can I still charge two months’ deposit?
Yes, in year one under state law, but deposits of more than one month must include the installment option.

I own two units personally and one in an LLC; am I exempt?
Likely no. Unit counts aggregate across commonly controlled entities.

Make the Rule Your Advantage

Philadelphia’s installment rule can work for you: lower move-in costs, more qualified applicants, fewer disputes. Get ahead by standardizing lease language, scheduling the three-payment plan, separating deposit ledgers from rent, and documenting your unit count and exemption status. Transparent processes now mean smoother renewals in 2026 and less legal risk.

Ready to execute with confidence? Innovate Realty & PM will build compliant addenda, automate installment tracking, and train your team fast. Request a free rental analysis and turn compliance into a real leasing advantage. Call us today!