Landlords should familiarize themselves with the statewide regulations that govern security deposits in New Hampshire and understand their responsibilities.
Quick Facts for New Hampshire
- Maximum Amount: 1 month’s rent or $100, whichever is greater
- Duration for Return: 30 days after end of lease
- Penalty for Late Returns: Twice the refund amount, plus any interest due
- Deadline to Claim Funds: Within 6 months after tenancy ends
New Hampshire landlords have the right to require a security deposit when entering a lease agreement. Security deposits serve to protect the interest of both landlords and tenants. Landlords benefit by safeguarding against losses that may stem from a tenant’s action. Tenants should adhere to the terms of their lease agreement.
The Purpose of a Security Deposit
Security deposits serve as a safety net for landlords should they suffer financial losses caused by the tenant, who may have damaged the rental property, or breach the lease agreement, or skipped on the rent. Let’s dive into some of the elements of security deposits in this state.
A New Hampshire landlord is allowed to charge a security deposit that is equal to one month’s rent (NH RSA 540-A:6, I (a)).
A landlord should not mingle security deposits with personal finances (NH RSA 540-A:6 II (a)). However, a landlord can mingle all security deposits in a single account at any financial institution in the state of New Hampshire (NH RSA 540-A:6, II (b)).
A landlord can choose to accept a surety bond from a tenant in place of a security deposit. The surety bond should be an amount equal to the total value of the security deposit (NH RSA 540-A:6, II (c)).
Security Deposit Receipt
After receiving a tenant’s security deposit, the landlord must give the tenant a signed receipt showing the amount of the deposit and where the deposit or bond is held. Any repairs that are needed to be made to the property should be included. The landlord can provide the tenant with a list of repairs needed within five days of move-in (NH RSA 540-A:6, I (b)).
No receipt is required if the tenant pays the security deposit in the form of a personal or bank check, or a check issued by a government or nonprofit agency (NH RSA 540-A:6, I (c)).
Security Deposit Interest
If a landlord holds a tenant’s security deposit for over a year, he/she is required to pay the tenant interest on the deposit (NH RSA 540-A:6, IV (a)).
- Tenant Inquiry: When requested, a landlord must provide the tenant with the name of the financial institution where the security deposit is held, the account number, the amount on deposit and the interest rate on the deposit (NH RSA 540-A:6, IV (b)).
- Request Interest Earned: A tenant may request the interest earned on a security deposit every 3 years, 30 days before the expiration of that year’s tenancy. The landlord must comply with the request within 15 days of the expiration of that year’s tenancy (NH RSA 540-A:6, IV (c)).
Return of Security Deposit
- Time-frame: A landlord must return a tenant’s security deposit, all or in part, along with any interest earned, if any, within 30 days of the tenancy termination (NH RSA 540-A:7, I).
- Itemized List of Deductions: A landlord may deduct the cost for damage from the security deposit and provide the tenant with a written, itemized list of the damages, the nature of any repairs, or evidence that the repairs have been or will be completed (NH RSA 540-A:7, I).
Landlords can make the following deductions from a tenant’s security deposit (NH RSA 540-A:7, II):
- Cost of repairs
- Real estate taxes if requirement is established under the lease agreement
- Unpaid rent
- Other lawful, unpaid charges due
A landlord who fails to return a tenant’s security deposit will have to pay twice the amount of the security deposit, plus any interest due (NH RSA 540-A:8, I (b)).
Any unclaimed deposits, plus interest due that remains after 6 months after tenancy termination, if forfeited by the tenant and can be claimed by the landlord(NH RSA 540-A:8, II).
A security deposit is not intended to be applied to a tenant’s last month’s rent, but the provision can be established in the rental agreement.
How to Get a Full Refund of Security Deposit
At the end of the tenancy, a full security deposit can be returned to the tenant if there is no damage to the rental property, rent is paid in full, all charges in the rental agreement are covered and any financial loss from a breach of contract is recovered by the landlord.
Security Deposits and Tax Filing
A security deposit can either be held to cover losses or refunded to the tenant, all or in part. What happens at the end of the tenancy determines how a security deposit is treated for tax purposes.
- Accounting for Security Deposits: Security deposits are treated as either assets or liabilities when filing taxes. Tenants shouldn’t deduct security deposits as expenses and landlords shouldn’t declare them as income when in escrow intended to be returned to the tenant.
- Security Deposit Write-Off: When filing taxes, a landlord cannot deduct security deposits as expenses until used to cover losses. Forfeited deposits should be declared as income on a landlord’s tax return.
“Normal Wear and Tear” vs. Damage
- “Normal wear and tear” is deterioration that occurs as a result of everyday use of the rental unit, and without negligence, carelessness, accident, or misuse or abuse by the tenant.
- “Damage” refers to destruction to the rental unit that occurs because of abuse or negligence by a tenant during the course of the tenancy and can affect usefulness, value, normal function of the rental unit.
Transfer of Ownership
A landlord is required to turn over the security deposit, plus any interest when the deed is delivered or the new owner takes over the premises, or within 5 days after the transfer occurs, but before the tenancy has expired (NH RSA 540-A:6, III (a) (c)). The landlord is required to notify the tenant by registered or certified mail of the new ownership, including the name and address of the new owner that holds the security deposit (NH RSA 540-A:6, III (b)).
Tips for New Hampshire Landlords on the Right Practices for Security Deposits
- Charge tenants a security deposit in the amount of 1 month’s rent
- Return security deposits within 30 days of tenancy termination and provide written itemization of the damage and the charges
- Withhold security deposits for unpaid rent, damage to the rental unit, real estate taxes and other lawful charges due under the lease
- Expect to pay twice the amount of the security deposit for wrongful withholding
- Seek damages in legal proceedings if the security deposit is necessary
New Hampshire landlords and tenants can benefit from knowing the law that governs the state’s security deposit law. Both parties can protect their interests by understanding how the law applies to them.
Make sure to refer to the §§ 540-A:5 to A:8 and 540-B:10. for more on security deposits. Landlords should educate themselves on this topic to protect their rental property and avoid any legal trouble.