North Carolina Security Deposit Laws

Landlords in North Carolina normally require tenants to pay a security deposit as part of the move-in costs. This is done for several reasons, including:

  • To cover excessive property damage
  • To cover lost rent payments
  • Covering excessive cleaning costs
  • Covering unpaid utilities when the tenant moves out

Just like other states, North Carolina has a statewide security deposit law in place. You must abide by all its provisions when charging tenants a security deposit in North Carolina.

The following are common topics of discussion regarding security deposit regulations in North Carolina.

Security Deposit Limits

How you charge your tenants as a security deposit depends on the length of the lease. If operating a weekly agreement, then the maximum you can charge as a security deposit should be the equivalent of two weeks’ rent.

For monthly leases, the maximum deposit you can charge a tenant should be equivalent to two month’s worth of rent and no more. These limits, however, do not apply to the lease of single rooms.

Pet Deposit in North Carolina

In some states, landlords cannot charge a separate pet deposit. However, in North Carolina, you can charge a reasonable, nonrefundable fee.

Storing a Tenant’s Deposit

You have two options to take when storing a tenant’s security deposit. You can either place it in a trust account or post it as a bond.

If you choose to go with a trust account, you must ensure the account is a licensed, federally insured banking institution and operates in North Carolina.

If posting it as a bond, then you must make sure the company is licensed to operate in North Carolina. The bond amount should be equivalent to the tenant’s security deposit.

North Carolina Security Deposit Laws

Once you’ve complied with any of the aforementioned options, you must then provide the tent with a notice within 30 days. In the written notice, make sure to state the name and the address of the holding institution.

Appropriate Deductions to a Security Deposit

You can make deductions to a tenant’s deposit for several reasons, including:

  • To cover unpaid rent that the tenant still owes you
  • To cover unpaid utility bills
  • Covering excessive property damage. Examples of this can include a broken bathroom mirror or a missing doorknob.
  • Covering damages resulting from the tenant breaking the lease
  • To cover costs of re-renting the unit
  • To cover costs of storing or removing any property that a tenant leaves behind after moving out

Using a Security Deposit as Last Month’s Rent

The only time this can happen is if there is a written agreement in place allowing a tenant to do so. Otherwise, a tenant cannot use the security deposit to cover last months’ rent.

Deductions to Deposit to Cover Normal Wear and Tear

When it comes to damage, a landlord is only allowed to make deductions for excessive property damage, normal wear and tear does not fall under that category.

wear and tear in NC investment properties

Normal wear and tear’ is the gradual deterioration that occurs to a property due to everyday use. There is no misuse, accident, carelessness, negligence, or abuse on the part of the tenant.

Examples of damage from normal wear and tear include dirty grout, lightly scratched glass, stained bath fixtures, and faded wall paint. Because these kinds of damages occur naturally, a landlord cannot use the security deposit to cover these kinds of repairs or maintenance.

Walk-Through Inspections in North Carolina

A walk-through inspection allows the tenant time to fix any issues so as to safeguard their deposit against any deductions.

In some states, like neighboring Georgia, tenants have a right to a walk-through inspection. Both the landlord and the tenant walk the property and document the condition of the property.

This is, however, not the case in North Carolina. That being said, it’s common for both landlords and tenants to perform a walk-through inspection after a tenant moves out.

Providing Receipts for Security Deposit

As a North Carolina landlord, you do not have to provide tenants with a receipt for their security deposit.

Returning a Tenant’s Security Deposit

Once the lease ends, the landlord has exactly 30 days to return their tenant’s deposit. If you’ve made any deductions, you must provide an itemized list indicating why those deductions were made. The itemized list must be written and mailed with the remaining portion of the deposit to the tenant.

returning NC security deposit

If you’re not able to provide a cost estimate of the repairs, you may send an interim cost of deductions during the first 30 days. You’ll have to provide the final accounting of the deductions within 60 days of the end of the least period.

Wrongly Withhold a Tenant’s Deposit

Tenants can sue you for wrongfully withholding part or all of their deposit. If you’re found to have knowingly failed to comply, you’ll forfeit your rights to make any deductions to the tenant’s deposit.

In addition, you may also need to pay damages to the tenant, as well as any attorney fees.

Changes in Property Ownership During an Active Lease

If you sell or transfer ownership of your property during a lease term, you must do one of the following:

  1. Transfer the remaining deposit to the incoming landlord. You must then notify the tenant, in writing, of this. Once this is done, the incoming landlord takes upon all responsibilities regarding managing a tenant’s security deposit.
  2. Choose to return the tenant’s deposit (or whatever of it is remaining) to the tenant.

Summary:

With this overview of security deposit law, you’re now better equipped to protect your property and yourself. That being said, managing a property, keeping track of security deposits and changes in legislation can be overwhelming.

Consider hiring the services of a reputable property management company like Anchor Real Estate. They can aid you in managing your property and help you make sense of and rentals laws include landlord-tenant laws, eviction laws, and regulations relating to lease agreements.

Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws frequently change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.

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