Most landlords in North Carolina require their tenants to pay a security deposit as part of the move-in costs. Renting out a property can come with a few risks, such as the following.
- A tenant may choose to break their lease early.
- A tenant may move out and not clear their utility bills at the end of their term.
- The tenant may stop or even refuse to pay their monthly rent.
- The tenant may cause negligent or careless property damage.
In such cases, the security deposit may come in handy. It can help you minimize the financial damage resulting from any of the aforementioned risks.
With that said, under the landlord-tenant law, North Carolina requires landlords to abide by certain rules when it comes to handling a tenant’s security deposit. The rules cover things like how much you can ask as a deposit, how you are required to store it, and what deductions you can make.
The following is a basic overview of the North Carolina security deposit law.
What’s the maximum security deposit can you charge tenants in North Carolina?
In North Carolina, there is a limit to how much you can charge tenants. The limit depends on the length of the rental lease.
If the lease is week-to-week, the most you can charge as a deposit is two weeks rent. If the lease is month-to-month, the maximum security deposit you can charge is 1.5 times the month’s rent. For leases longer than month-to-month, the most you can charge is two months’ rent.
Can you charge a pet deposit in North Carolina?
Yes, you can! You can charge tenants a reasonable, non-refundable pet deposit. This can help cushion you against potential damage that their pet can cause to your property.
However, you should exempt people with a service animal from paying a pet deposit. The Fair Housing Act requires landlords to provide all tenants with equal opportunity to use and enjoy their home. This includes people living with either a mental or physical disability.
Other protected classes in North Carolina include race, color, nationality, religion, and familial status.
Can you make deductions to a tenant’s security deposit in North Carolina?
Yes! However, you may only do so in certain circumstances. North Carolina allows landlords to keep a portion of their tenant’s security deposit for the following reasons.
- If the tenant refuses or stops paying rent. Tenants have an obligation to pay rent for the entire period the lease is in operation, whether they live there or not.
- If the tenant moves out without clearing their utility bills. Once a tenant signs the lease, some utilities will typically be transferred in their name. It will be their responsibility to clear them prior to moving out.
- If the tenant violates the terms of the lease agreement. For example, breaking the lease early without a legally justified reason. You may be able to use some or all of the deposit to cover your costs of re-renting the unit.
- To cover the costs of storing personal belongings that a tenant may have left after being evicted from the unit.
- To pay for damage exceeding normal wear and tear.
When must North Carolina landlords return their tenants’ security deposit after moving out?
You have exactly 30 days to return your tenant’s deposit after they move out. You can do so either in person or via mail. But if, for whatever reason, you’re unable to accurately calculate the deductible charges within the thirty-days’ window, you’ll have another 30 days to do so.
With that said, if it takes sixty days, you’ll still need to provide your tenant with an itemized list of deductions within 30 days.
It’s your tenant’s responsibility to provide you with a forwarding address. If they don’t, you may use as much of the deposit as necessary to pay for any rental damages. The tenant will have a maximum period of 6 months to make any claims to the deposit.
What happens if you wrongfully withhold your tenant’s security deposit?
If you fail to account for or return the deposit, your tenant can sue you for wrongful withholding. If you’re found guilty of willfully failing to comply with any of the North Carolina rules, you may forfeit all rights you have to the tenant’s deposit.
In addition, you may have to refund them the entire deposit, as well as pay for any incurred damages and plus attorney fees.
How must North Carolina landlords store their tenants’ security deposits?
You have two options when it comes to storing your tenants’ security deposits. The first option is to store it in a trust account. The account must be in a financial institution that is insured and licensed to operate in North Carolina.
The other option you have is to post it as a bond. The insurance company you post it to must be from an insurance company licensed to operate in North Carolina.
Do North Carolina landlords have to notify their tenants after receiving their security deposit?
Yes! Within 30 days of receiving the deposit, you must notify your tenant of the financial institution holding their deposit.
What happens to the tenant’s deposit if the property changes ownership during a tenancy?
If the property’s ownership is sold or transferred during a lease term, you’ll have two options to consider.
One of the options would be to transfer the deposit, less any deductions, to the new owner. You must then notify the tenant of the ownership transfer, and provide them their name and address.
The other option would be to return the deposit, less any deductions, to the tenant.
Let Keyrenter Raleigh take on the stress of owning a rental property. We can help with property maintenance, screening tenants and collecting security deposits, so you don’t have to worry.
We understand the North Carolina landlord-tenant laws, and can help manage your Raleigh rental property reliably and professionally. Get in touch to learn more!
Disclaimer: This content isn’t a substitute for professional legal advice from a qualified attorney. If you have a specific question relating to the North Carolina security deposit law, KeyRenter Raleigh can help.