North Carolina Security Deposit Laws

North Carolina Security Deposit Laws

North Carolina landlords who require tenants to pay a security deposit must abide by the rules under NC Gen Stat § 42-50 and the North Carolina landlord-tenant laws. There are consequences for failing to do so. Among other things, it may result in the forfeiture of the security deposit. 

The following is a basic overview of the North Carolina security deposit law. The only exception to the tenant's security deposit rules is for landlords who rent out single rooms. 

What is the Maximum Amount of Security Deposit can a landlord asks for in North Carolina? 

State laws require North Carolina landlords to abide by certain security deposit limits when it comes to NC security deposits. But the exact security deposit amount depends on the rental period and rental agreement. 

If the rental agreement runs week-to-week, you must not charge a security deposit exceeding two weeks' rent. If the lease runs month-to-month, you must not charge a security deposit exceeding one and a half months’ rent. If the lease runs longer than a month, the security deposits must have a maximum limit equivalent to two months’ rent. 

security deposit

Can landlords in North Carolina Charge an Additional Pet Deposit? 

Yes! According to North Carolina laws, you can charge an additional pet deposit as long as the charge is reasonable and nonrefundable. But please note that you must exempt disabled people who use a service animal, as per the Fair Housing Act. You’d be within your rights, however, to require the tenant to pay for any damages exceeding normal wear and tear that their service animal has caused to the unit. 

How must landlords in North Carolina store their tenant’s security deposits? 

Landlords in North Carolina have two options when it comes to storing their tenant’s security deposits. The first option is to store the tenant's deposit in a trust account. This trust account must be in a financial institution located within the state of North Carolina or a banking institution that is licensed and federally insured. 

The other option is to post a bond for the amount of security deposit from an insurance company. The company must have a license to operate in North Carolina. 

Do landlords in North Carolina have to notify their tenants upon receipt of their deposit? 

Yes, within a period of 30 days after receiving your tenant’s deposit, you must notify the tenant of several things. Including, the financial institution where you’ve stored their deposit. Or, if you’ve posted a bond, the name of the insurance company. 

How must landlords in North Carolina store their tenant’s security deposits? 

In North Carolina, you may be able to store part or all of your tenant’s security deposit for any of the following reasons. But it's always best to do a walk through inspection to confirm.

deposit storage

  • Unpaid rent. Tenants have an obligation to clear all rent balances prior to moving out. If they don’t, you can use part or all of a renter's security deposit to cover unpaid rent. 
  • Unpaid utility bills. Usually, tenants will be responsible for paying certain utility bills, including gas, electric, and water bills. If they move out with unpaid bills, you can make appropriate deductions to cover the costs. 
  • Lease violations. Some violations a tenant may cause can have some financial bearing on your investment business. For example, if the tenant makes unauthorized changes to their unit. 
  • Costs of re renting the unit. A lease runs for a specific period of time. If the tenant ends up breaking their lease agreement early, you can use part or all of their deposit in your re renting efforts. North Carolina landlords have a legal duty to “mitigate damages” after a tenant leaves in order to minimize losses. 
  • Costs of removing and storing a tenant’s possession after a successful eviction. In this case, the tenant fails to remove their own property.
  • Court costs and valid late payment, unpaid bills, or eviction fees. 
  • Damage exceeding normal wear and tear or the removal of a tenant's property. Normal wear and tear is the natural degradation of an appliance or fitting over time. 

When must landlords in North Carolina return their tenant’s security deposit? 

As per the security deposit laws, you’ll have 30 days after a tenant moves out to return part or all of their security deposit. You can do so either by mail or in person. If a landlord fails to accurately estimate the deductions within the 30 days window, you’ll have another 30 days to do so. 

But even if you’ll be taking 60 days, you’ll still be required to provide your tenant with an estimate of the changes within 30 days of them moving out as per North Carolina laws. 

Of course, it’s your tenant’s responsibility to provide a forwarding address. If they don’t, you may use as much of the balance as necessary to pay for damages or other deductions. A tenant in North Carolina has exactly six months to lay claim on their deposit. If they don’t, it’ll be yours to keep. 

What can happen if a landlord in North Carolina fails to return their tenant’s security deposit on time? 

In such a case, the tenant can file a lawsuit in a small claims court for the return of their deposit. If they win the suit, you’ll forfeit all rights you have in regard to the North Carolina security deposit. Among other things, you may be required to return the renter's security deposit back to the tenant as a whole, plus pay the court and attorney costs. 

security deposit sold

What would a landlord need to do if they were to sell the property? 

As a North Carolina landlord, you’ll have two options to consider when it comes to the tenant’s security deposit. One option would be to transfer the deposit to the new owner, minus allowable deductions without normal wear and tear. Or, to return the deposit back to the tenant, minus lawful deductions or any court costs you may have incurred. 

Bottom Line

The security deposit rules in North Carolina are designed to give landlords some protection against potential tenant damages, safeguarding their investments for the future. But North Carolina law is complex and you may find yourself in need of help. In which case, please don't hesitate to contact us at Alotta Properties. Our property management team is fully versed in the security deposit laws and is ready to help you.

Disclaimer: This blog isn’t a substitute for professional legal advice. For expert help regarding this content or any other aspect of the North Carolina landlord-tenant law as a whole contact, a licensed real estate broker, attorney, or property management company - Alotta Properties can help. We’re a full-service property management company in Fayetteville, NC. 

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