Overview
North Carolina has specific laws governing the collection, use, and return of security deposits to protect both landlords and tenants. These laws aim to ensure transparency and fairness throughout the rental process.
Under North Carolina General Statutes § 42-50 to § 42-56, landlords are required to follow standardized procedures for handling tenant security deposits. Violations may lead to forfeiture of the deposit and other legal consequences.
This guide covers:
How much landlords can charge
Where deposits must be stored
Rules for returning security deposits
Penalties for non-compliance
Related Statute: N.C. Gen. Stat. § 42-50 to § 42-56
1. Security Deposit Limits & Storage Requirements
Maximum deposit: Landlords may charge up to two weeks’ rent for week-to-week tenancies, one and a half months’ rent for month-to-month tenancies, and two months’ rent for fixed-term leases.
Storage requirements: Deposits must be kept in a trust account in a licensed and insured bank or savings institution located in North Carolina.
Tenant notification: Landlords must notify tenants in writing within 30 days of the beginning of the lease regarding the name and address of the bank where the deposit is held.
Law Reference: N.C. Gen. Stat. § 42-50, § 42-51
2. Security Deposit Returns & Allowable Deductions
Return deadline: Landlords must return the security deposit within 30 days of lease termination. If unable to complete repairs in that time, a temporary accounting must be provided within 30 days and a final one within 60 days.
Permissible deductions: Landlords may deduct for unpaid rent, damage beyond normal wear and tear, court costs, and costs of re-renting the premises due to early lease termination.
What landlords cannot deduct: Landlords cannot deduct for ordinary wear and tear, including minor scuffs, faded paint, or worn flooring.
Itemized statement required: An itemized statement of deductions must be provided to the tenant with any portion of the deposit that is returned.
Law Reference: N.C. Gen. Stat. § 42-52
3. Interest Payments & Documentation Requirements
Interest payments: Interest on security deposits is not required by North Carolina state law unless stipulated in the lease agreement.
Move-in condition report: While not legally required, documenting the condition of the rental unit at move-in is highly recommended.
Tenant review period: Tenants are encouraged to inspect and document any existing damages during move-in to prevent future disputes.
Failure to provide documentation: If landlords fail to comply with the law, they may forfeit their right to retain any portion of the deposit.
Law Reference: N.C. Gen. Stat. § 42-51, § 42-52
4. Penalties for Mishandling Security Deposits
North Carolina enforces penalties for landlords who do not comply with deposit handling laws.
Failure to return the deposit or provide an itemized statement may result in the landlord being required to return the full amount of the deposit and may be liable for damages.
Failure to store the deposit correctly or notify the tenant about the deposit location may lead to similar consequences.
Law Reference: N.C. Gen. Stat. § 42-55, § 42-56
Key Takeaways
Landlords may charge up to two months’ rent depending on the type of tenancy.
Security deposits must be held in a North Carolina bank trust account, and tenants must be notified within 30 days.
Deposits must be returned within 30 days, or a final accounting must be provided within 60 days if necessary.
Only specific deductions are permitted, and landlords must provide an itemized list.
Failure to comply with the law may result in full forfeiture of the security deposit and additional penalties.
By understanding and following North Carolina security deposit laws, landlords can stay compliant, and tenants can better protect their financial interests.
