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Security
Deposit Laws PART 1:
Security Deposit Interest and Max Deposit Amounts
Few
things are more important than security deposit laws but the sad fact
is that most people don't read them until they find themselves in hot
soup. With our plain English guide for every U.S. state, you can now
grab the chance to brush up on your knowledge of landlord security
deposit.
This
first part will answer two good questions that we get asked so often:
"What is maximum security deposit amount that a landlord can ask
for?" ...and "Do I have to pay my tenants any security deposit
interest?"
For those of you grappling with security deposit refunds or staking a
claim on the deposit, Click
here to Part 2 for security deposit laws on the return of
security deposit.
Some states behave like a fussy nanny and slap on tough laws on
you should collect, hold and return the security deposit... while
others are happy as long as noone swallows up the deposit. If you don't
find any extra details for your state below, it means your
state
is more relaxed (e.g. you can stash the deposit money in a
cookie
jar instead of a separate interest-bearing account).
Disclaimer:
While we work hard to make sure that the state laws below are both
accurate and updated, they are for general information only.
Always double-check with your state plus city laws and if you have any
questions, Click
here to
ask a real estate lawyer online.
Security
Deposit Laws for Security Deposit Interest and Amounts
Alabama AL
- Maximum deposit amount of 1 month's rent. According to Alabama
security deposit laws, landlord is allowed to ask
for more than this amount if tenant keeps pets, makes alterations to
the property or carry out activities that jack up the liability risks.
Alaska AK
- Maximum
deposit amount of 2 month's rent if the monthly rent is $2,000 or less.
If the monthly rent is more than $2,000, then there is no maximum limit
for the deposit amount.
Wherever possible, the
deposit money should be kept in a trust account in a bank, savings and
loan association or licensed escrow agent.
Arizona AZ
- Maximum deposit amount of 1.5 month's rent, unless tenant volunteers
and agrees to pay more than this limit.
Arkansas AR
- Maximum
deposit amount of 2 month's rent
California CA
- Maximum
deposit amount of 2 month's rent for an unfurnished property. If the
property is furnished, the maximum limit is stretched to 3
month's rent according to California security deposit law.
Colorado CO
- No limit for the deposit amount
Connecticut CT
- Maximum
deposit amount of 2 month's rent if the tenant is less than 62 years
old. If tenant's age is 62 years and older, the maximum limit is cut to
1 month's rent.
According to Connecticut security deposit law, the landlord has to
pay interest on security deposit to the tenant each year on the lease
anniversary date. The interest rate is decided by the Connecticut
Department of Banking and varies from year to year,
but state laws prevent it from dipping below 1.5%.
Delaware DE
- Maximum
deposit amount of 1 month's rent for a fixed term tenancy
lasting 1 year of more. There is no maximum limit for a month to month lease,
but any amount over 1 month of rent has to be refunded to the
tenant after the first year of lease. On top of this amount,
the landlord is allowed to ask for an additional 1 month's rent as pet
deposit.
District of
Columbia DC - Maximum
deposit amount of 1 month's rent
Florida FL
- No limit
for the deposit amount
Georgia GA
- Maximum
deposit amount of 1 month's rent
Hawaii HI
- Maximum
deposit amount of 1 month's rent
Idaho ID
- No limit
for the deposit amount
Illinois IL
- No limit
for the deposit amount.
If the landlord owns a rental building with 25 or more rental units and
the security deposit is held for more than 67 months, then the landlord
has to pay security deposit interest to the tenant.
Indiana IN
- No limit
for the deposit amount
Iowa IA
- Maximum
deposit amount of 2 month's rent
Kansas KS
- Maximum
deposit amount of 1 month's rent for an unfurnished property. If the
property is furnished, the maximum limit is stretched to 1.5
month's rent. On top of this amount, the landlord is
allowed to ask for an additional 0.5 month's rent as pet deposit.
Kentucky KY
- No limit
for the deposit amount. The
security deposit has to be held in a separate account apart from all
other funds.
Louisiana LA
- No limit
for the deposit amount. Louisiana deposit security deposit law
does not require the
landlord to pay any security deposit interest unless
he or she agrees to.
Maine ME
- Maximum
deposit amount of 2 month's rent
Maryland MD
- Maximum
deposit amount of 2 month's rent. Once the
security deposit is received, it has to deposited into a
separate interest-bearing account of a Maryland bank within 30 days. If
the deposit amount is more than $50, then security deposit interest has
to be paid to the tenant. This simple interest rate is locked in at 3%
per year and accrued every 6 months.
Massachusetts MA -
Maximum
deposit amount of 1 month's rent.
Once
the
security deposit is received, it has to deposited into a
separate
interest-bearing account of a Massachusetts bank within 30 days.
If the lease extends over 1 year, then the landlord has to pay
deposit interest to the tenant each year on the lease
anniversary date. This deposit interest rate is tagged to the interest
rate of the bank (where the deposit is kept) but capped at a maximum of
5% per year.
Michigan MI
- Maximum
deposit amount of 1.5 month's rent
Minnesota MN
- No limit
for the deposit amount.
The landlord has to pay the tenant interest on the security deposit.
According to Minnesota security deposit laws, this interest is
accumulated during the time when the landlord is holding onto the
security deposit.
Mississippi MS
- No limit
for the deposit amount
Missouri MO
- Maximum
deposit amount of 2 month's rent
Montana MT
- No limit
for the deposit amount
Nebraska NE
- Maximum
deposit amount of 1 month's rent.
On top of this amount, the landlord is allowed to ask for an additional
0.25 month's rent as pet deposit.
Nevada NV
- Maximum
deposit amount of 3 month's rent
New Hampshire
NH - No limit
on the deposit amount for
landlords owning 6 rental units or less. If the landlord owns more than
6 rental units, she/he can only ask for a maximum
deposit amount of 1 month's rent. New Hampshire security deposit laws
require the landlord to
keep the deposit in a special escrow account
or post a bond with the local municipality.
New Jersey NJ
- Maximum
deposit amount of 1.5 month's rent.
The landlord has to keep the security deposit in a separate
interest-bearing account. The landlord has to
pay security deposit interest to the tenant each year on anniversary
date of receiving the deposit. The New Jersey security deposit
laws requires landlords with 10 or more rental units to keep the
security deposit in an insured money market fund or federally insured
bank account. In this case, the interest rate has to be equal to the
average rate of interest paid by the bank for money market accounts.
New Mexico NM
- Maximum
deposit amount of 1 month's rent for lease agreements lasting less than
1 year. There is no limit on the deposit amount for
lease agreements lasting 1 year or more. If the landlord collects more
than 1 month's rent as deposit, he or she has to pay the tenant current
passbook interest on the entire deposit amount.
New York NY
- No limit
for the deposit amount. The
security deposit has to be held in a separate account apart from all
other funds. The landlord of a building with 6 or more rental units has
to keep the security deposits in interest-bearing New York bank
accounts. In this case, the landlord is allowed to keep 1%
security deposit interest as administrative expenses and the remaining
interest has to be
paid to the tenant.
North
Carolina NC - Maximum
deposit amount of 1.5 month's rent
for a month to month lease. If the lease term is longer than 2 months,
then the maximum limit is stretched to 2 month's rent. On top of
this amount,
the landlord is allowed to ask for a additional,
nonrefundable pet
deposit of "reasonable" amount. The landlord has to
keep the security deposit in a trust account of a North
Carolina bank or buy a deposit bond from a North Carolina
insurance company.
North Dakota
ND - Maximum
deposit amount of 1 month's rent. On top of this amount,
the landlord is allowed to ask for up to an additional $1,500 as pet
deposit. If the security deposit is held for more than 9 months, then
landlord has to
pay interest on security deposit to the tenant.
Ohio OH
- No limit
for the deposit amount.
If the landlord asks for more than 1 month's rent as security deposit
and holds the deposit money for more than 6 months, then he or she has
to pay the tenant interest on any additional amount over 1 month's rent.
Oklahoma OK
- No limit
for the deposit amount.
The landlord is required by Oklahoma security deposit laws to keep the
deposit money in an insured Oklahoman escrow account.
Oregon OR
- No limit
for the deposit amount
Pennsylvania
PA - For
the first year of lease, the landlord can ask for up to 2 month's rent
as security deposit. Once the second year of lease kicks in, the
landlord is only allowed to retain up to 1 month's rent as deposit so
any additional amount over this limit has to be refunded to the tenant.
Rhode Island
RI - Maximum
deposit amount of 1 month's rent
South
Carolina SC - No limit
for the deposit amount
South Dakota
SD - Maximum
deposit amount of 1 month's rent. According to South Dakota security
deposit laws, the landlord is allowed to ask
for more than this amount if tenant keeps pets, makes alterations to
the property or carry out activities that jack up the liability risks.
Tennessee TN
- No limit
for the deposit amount.
The landlord has to keep all security deposits in an account whose sole
purpose is to hold tenant deposits according to Tennessee security
deposit law.
Texas TX
- No limit
for the deposit amount
Utah UT
- No limit
for the deposit amount
Vermont VT
- No limit
for the deposit amount
Virginia VA
- Maximum
deposit amount of 2 month's rent
Washington WA
- No limit
for the deposit amount.
Washington security deposit laws require the landlord to keep the
deposit money in a trust account. Interestingly, any interest that is
earned by the security deposit belongs to the landlord so he or she is
welcome to keep it.
West Virginia
WV - No limit
for the deposit amount
Wisconsin WI -
No limit
for the deposit amount
Wyoming WY
- No limit
for the deposit amount
Now
that you know exactly how to collect and keep your tenant's security
deposit, let's learn how you should deduct and return it:
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