Minnesota Security Deposit Collections & Holdings

Minnesota Security Deposit Collections & Holdings

Last Updated: January 27, 2023 by Ashley Porter

To learn about laws on security deposit returns in Minnesota, click here.

Maximum Security Deposit Allowed in Minnesota

Minnesota state law does not limit the maximum security deposit, but local jurisdictions can establish their own limits, like in Minneapolis.

Minneapolis law limits the maximum security deposit to one month’s rent. However, if the landlord collects more than the first month’s rent in advance, the maximum security deposit is one-half month’s rent.

Can Landlords Charge an Additional Pet Deposit in Minnesota?

Yes, landlords can collect an additional pet deposit in Minnesota, except for service dogs and emotional support animals.

If a landlord collects a pet deposit in Minnesota, it must be handled according to the same rules as a security deposit.

How Much Rent Can a Landlord Collect Upfront in Minnesota?

There is no limit on the amount of rent that can be collected upfront in Minnesota. Many states have a limit on the amount of rent that can be collected at once, but Minnesota does not.

Security Deposit Collections in Minnesota

While other states have additional requirements for landlords that collect a security deposit, such as providing certain documentation of the condition of the unit at move-in, Minnesota does not.

Do Landlords Have to Provide a Receipt for the Security Deposit in Minnesota?

In Minnesota, landlords are required to provide a receipt for the security deposit for payments made in cash.

What Obligations Do Landlords Have to Establish the Condition at Move-in in Minnesota?

Minnesota law does not require landlords to document or establish the property’s condition at move-in. While other states legally require a written inventory of damages to be completed when collecting a security deposit, Minnesota does not.

Security Deposit Holdings in Minnesota

Minnesota law does not require landlords to hold security deposits separate from other funds.

Are Tenants Entitled to Interest on Their Security Deposit in Minnesota?

Minnesota law does require landlords to provide interest on held security deposits. The minimum interest rate is 1% per year. However, landlords are not required to provide interest if the accrued amount at the end of the lease term is less than $1.

Interest accrues starting on the first day of the next month following the payment of the security deposit. The accrual of interest ends on the earlier of either:

  • The last day of the month in which the landlord returns any remaining portion of the security deposit
  • The exact date of the entry of a judgment for the security deposit

So for example, if a landlord collects a security deposit on January 15th and returns it on December 10th, interest accrues from February 1st to December 31st.

How Are Security Deposits Accounted for in Minnesota?

Security deposits are not considered taxable income when they are collected.

What Happens to a Security Deposit When the Property is Sold in Minnesota?

When a property is sold in Minnesota, the landlord has 60 days after the transfer of ownership to either:

  • Transfer the security deposit and interest to the new owner and notify the tenant in writing; or
  • Return the security deposit and interest to the tenant

In either case, the original landlord can make any allowed deductions first. If a tenant’s lease term ends within the 60-day period, the landlord must instead return the security deposit to the tenant within 21 days.

If the original landlord chooses to make deductions and then transfer the security deposit to their successor, they must notify the tenant in writing of the amount transferred (after deductions) and the successor’s name and address.

The notice must include a postage-paid envelope addressed to the successor. If the tenant does not object to the amount within 20 days, the successor is only liable to the tenant for the amount transferred.