Minnesota property owners avoid costly mistakes when they understand how the state’s security deposit laws work. Clear rules around deductions, deadlines, and handling help prevent disputes and legal issues.
This guide breaks down what landlords need to know, including deposit limits, storage and interest requirements, allowable deductions, return timelines, dispute handling, and other key legal obligations.
Statutes Regulating Minnesota Security Deposits
Minnesota’s security deposit rules appear in Chapter 504B of the Minnesota Statutes, which outlines how landlords collect, hold, return, and deduct residential deposits.
Maximum Security Deposit Amounts Under Minnesota Law
Minnesota sets no statewide limit on the amount a landlord may collect as a security deposit. Property owners may choose any amount that suits their rental, regardless of lease type, contract length, or other terms.
Some cities create their own rules. Minneapolis, for example, caps deposits based on the rent structure. If a landlord collects only a deposit and the first month’s rent, the deposit cannot exceed 1 month’s rent. If a landlord also collects last month’s rent in advance, the deposit limit drops to half a month’s rent.
Security Deposit Storage Regulations
Minnesota does not require landlords to use a specific type of bank account, provide a receipt, or disclose where they hold a security deposit. Property owners may store these funds in any way that they see fit, as long as they meet state rules for timely returns and pay the required simple annual interest.
Security Deposit Interest in Minnesota
Minnesota landlords do not need to place security deposits in interest-bearing accounts. However, state law requires property owners to pay tenants simple annual interest of 1 percent on any deposit they hold, no matter where they keep the funds.
Making Security Deposit Deductions
Security deposit deductions help landlords preserve the condition of a rental property by ensuring funds are available to address damage beyond ordinary wear and tear. Tenants sometimes leave issues that exceed normal wear, and landlords rely on deposit funds to restore the unit and protect the property’s long-term value.
When Landlords Can Deduct
Minnesota landlords may draw from a tenant’s security deposit for the following reasons:
- Repair damage beyond normal wear and tear that affects the rental unit
- Recover unpaid rent left outstanding after the tenant moves out
- Address lease violations that result in clear financial loss to the landlord
- Replace items the tenant removed or failed to return at move-out
- Cover excessive cleaning costs when the tenant leaves the unit dirtier than move-in
When Landlords Can’t Deduct
Minnesota landlords cannot draw from a tenant’s security deposit for the following reasons:
- Address conditions that reflect normal wear and do not reduce property function
- Charge for routine cleaning typically expected between tenant turnovers
- Fix problems caused by the landlord’s own failure to complete repairs
- Cover property aging unrelated to tenant behavior or misuse
- Recover costs not tied to the tenant’s obligations under the lease
Necessary Documentation to Accompany Deductions
Minnesota landlords must provide tenants with an itemized written statement that explains each deduction taken from the security deposit and the reason for every charge. State law does not require landlords to include receipts or invoices, though many property owners add them to show how they calculated repair or cleaning costs.
What to Do When Deductions are Greater Than the Deposit
Sometimes a tenant leaves damage that exceeds the security deposit. When this occurs, Minnesota landlords may bill the former tenant for the remaining balance and should request payment quickly. State law requires landlords to return any remaining deposit or provide a deduction statement within 21 days, after which they may pursue any unpaid amounts.
Landlords who cannot collect the balance may outsource the debt to a collections agency or file a claim in the local small claims court.
Returning Security Deposits to Tenants
Minnesota law outlines how landlords must return any remaining portion of a tenant’s security deposit after applying all eligible deductions, which ensures accurate and timely refunds.
Required Timeline for Return
Minnesota landlords must return the remaining deposit or provide the written deduction statement within 21 days of the tenant moving out. This 21-day period begins once the tenancy ends and the tenant vacates the unit.
Method for Return
Minnesota landlords typically return a tenant’s deposit by mailing a check to the tenant’s last known address, but can pay in any way they see fit. The return must include an itemized written list of all deductions taken from the deposit. If no deductions apply, the landlord must return the full amount without any additional paperwork.
Penalties for Late Return
Minnesota landlords who miss the 21-day return deadline or withhold funds in bad faith face serious consequences. Tenants may recover the full deposit, interest, and a civil penalty equal to the greater of $500 or the amount wrongfully withheld, which reinforces the importance of meeting state requirements.
Security Deposit Disputes
If a tenant disagrees with how a landlord handles their security deposit, Minnesota law allows the tenant to challenge those decisions. Tenants usually start by contacting the landlord in writing to request clarification or repayment, and they may turn to mediation or the courts if the issue continues.
As a landlord, prepare for potential disputes by using move-in and move-out checklists, staying organized with accounting and bookkeeping, and including clear terms in your lease agreement. Strong documentation, detailed photos, knowledge of Minnesota laws, and consistent compliance with all timelines help prevent future disputes.
Using Condition Reports to Document Damage
When managing security deposits in Minnesota, landlords should use detailed move-in and move-out condition reports to track property changes, assign responsibility for damage, and communicate more effectively with tenants throughout the tenancy.
To do so, use property management software to create digital reports by capturing photos and videos directly from your smartphone. Thorough documentation before move-in and after move-out makes all security deposit deductions far more straightforward.
Sign up for a free TurboTenant account to collect security deposits, simplify documentation, and keep turnovers running smoothly.
FAQs: Minnesota Security Deposit Law
Can a landlord deduct painting from a security deposit in Minnesota?
A Minnesota landlord may deduct painting costs only when the tenant causes damage that goes beyond normal wear. Routine repainting tied to age or expected use does not qualify for a deduction under state security deposit rules.
Are nail holes considered normal wear and tear in Minnesota?
Small nail holes from typical picture hanging usually count as normal wear in Minnesota and do not justify a deduction. Larger holes, excessive markings, or damage from improper mounting may qualify as tenant-caused damage, allowing a landlord to deduct.
Does the landlord or tenant have to pay for carpet cleaning in Minnesota?
Landlords handle routine carpet cleaning tied to everyday use in Minnesota. When a tenant leaves excessive stains, odors, or damage that goes beyond ordinary wear, the landlord may deduct reasonable cleaning or repair costs from the security deposit.
What happens if a landlord doesn’t return a security deposit within 21 days in Minnesota?
If a landlord misses the 21-day deadline to return the deposit or provide an itemized deduction statement, the tenant may recover the full deposit, interest, and a civil penalty equal to the greater of $500 or the amount wrongfully withheld when the landlord acts in bad faith.
