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 is for landlords renting out single rooms. 

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

North Carolina requires landlords to abide by a certain limit when it comes to security deposits. But the exact amount depends on the length of the lease. 

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

security deposit

Can landlords in North Carolina Charge an Additional Pet Deposit? 

Yes! 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 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 deposit in a trust account. This account must be in a trust institution 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 them 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 deposit for any of the following reasons. 

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 their deposits to do so. 
  • Unpaid utility bills. Usually, tenants will be responsible for paying certain utility bills, including gas, electric, and water bills. If they move out without doing so, 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 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. 
  • Court costs and valid late payment or eviction fees. 
  • Damage exceeding normal wear and tear. 

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

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 you are unable 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. 

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 security deposit. Among other things, you may be required to return the deposit back to the tenant as a whole, plus pay the court and attorney fees. 

security deposit sold

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

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. Or, to return the deposit back to the tenant, minus lawful deductions. 

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 these laws are complex and you may find yourself in need of help. In which case, please don't hesitate to contact us at Alotta Properties. Are 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, Alotta Properties can help. We’re a full-service property management company in Fayetteville, NC. 

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