In New Hampshire, the collection and return of security deposits are primarily regulated under NH Rev Stat § 540-A:7 These laws provide a set of rules that New Hampshire landlords and property managers have to follow to protect all parties.
Exemption to Security Deposit Law in New Hampshire
New Hampshire security deposit law does not apply to owner-occupied buildings with five units or fewer or single-family residences leased by a landlord who does not possess another rental property except in the case where a unit is occupied by a tenant aged 60 or older. In the case of an elderly tenant, the regulations do apply to that individual lease.
Maximum Security Deposit Charge in New Hampshire
In New Hampshire, the maximum security deposit that can be charged is $100 or one month’s rent, or whichever is greater. Housing parks may ask for one month’s rent.
Additional Pet Deposits. Under New Hampshire’s law, there is no limit on pet deposit fees, but they often reach up to a month’s rent. People with disabilities who use service animals are entitled to full and equal access to housing. Thus, the tenant may not be discriminated against and the landlord may not require the tenant to pay extra to have a service animal. If the service animal causes damage to the rental unit, the tenant is liable to pay for any damages.
The Federal Fair Housing Act requires housing facilities to allow tenants who use service dogs and emotional support animals to have an equal opportunity to use and enjoy their home.
Security Deposit Holding Requirements in New Hampshire
Receipt Requirements: In New Hampshire, the landlord is required to provide a receipt for the security deposit. The signed receipt shall include the amount of the security deposit or bond and the location of where it will be held. The landlord is not required to provide the tenant with a receipt if the form of payment for the security deposit is a bank check or check issued by a government or nonprofit agency (on behalf of the tenant).
Upon request, the landlord must also provide the name of the bank, the account number, deposit sum, and interest rate to the tenant in addition to allowing them to review the landlord’s security deposit records.
Security Deposit Holdings in New Hampshire: New Hampshire laws do not require landlords to hold security deposits separate from other security deposits held by the same landlord, but they may not be commingled with the landlord’s assets. The security deposit must be held in a bank, savings, loan association, or credit union in New Hampshire.
Security Deposit Interest in New Hampshire: New Hampshire laws require landlords to provide interest on security deposits held for one or more years equal to the standard interest rate for a savings account at the financial institution where it is being held.
The tenant may request payment of the interest accrued on the deposit every three years, within 30 days of the current lease term’s expiration.
Allowable Deductions on Security Deposits in New Hampshire
The landlord may use the security deposit to make deductions only after the tenant has vacated the premises. The security deposit should be used to cover:
- Unpaid rent and/or unpaid charges.
- Costs of damage caused by the tenant’s failure to comply with obligations as a tenant but not those considered to be standard wear and tear.
- Certain property taxes the tenant is liable for per the lease.
Can the deposit be used by the tenant as last month’s rent? The deposit may be used as the last month’s rent only if both parties agree in the lease agreement. Otherwise, the security deposit should be handled separately from any rent balance left outstanding.
“Normal Wear and Tear” vs. Damage in New Hampshire
- “Normal Wear and Tear” refers to minor issues that occur naturally as a result of the tenant using the property as it was designed to be used. These minor issues can include gently worn carpets, loose door handles, fading wall paint and flooring, stained bath fixtures, lightly scratched glass, dirty grout and even mold.
- “Damage” refers to the destruction that is a result of abuse or negligence by a tenant during the tenancy period. Damage to the rental property negatively impacts its usefulness, value, or normal function. It can include pet damage (heavily stained and ripped carpets), broken tiles, holes in the wall, broken windows and missing fixtures.
Check out our article on wear and tear vs. damage to get a better idea of the difference.
The landlord can only charge the cost of repairs if the damage was caused by the failure of the tenant to comply with obligations outlined in the lease and in accordance with protecting the rental property and using it correctly.
Some of these responsibilities include:
- Keep the premises, including all plumbing fixtures, clean and safe.
- Dispose of garbage and other waste in a clean and safe manner.
- Use all facilities (e.g., electrical, plumbing, heating, etc.) and appliances reasonably.
- Maintain smoke detection and/or carbon monoxide detection devices.
- Comply with the maximum number of persons allowed to occupy the premises.
- Leave the premises in the same condition it was in when it was handed to the tenant.
Unless otherwise stated in the lease, the tenant should not:
- Change the locks on doors on the premises, except if necessary in an emergency.
- Destroy, damage, or remove parts of the premises.
- Unreasonably disturb the neighbor’s peaceful enjoyment of the premises.
- Engage in illegal activities involving prostitution, gambling, use of alcohol or controlled or prohibited substances, and other similar or illegal activities, or in activities promoting the same within the premises.
If the damage to the premises was caused by the tenant’s failure to comply with any of the above, then the landlord may take the cost of repairing it from the security deposit.
Returning Security Deposits in New Hampshire
Time Frame: A New Hampshire landlord has 30 days to return any unused portion of the security deposit plus any interest owed along with a written, itemized list of damages deducted. This period begins on the date of termination presented in the lease agreement, during which written notice should be mailed to the tenant’s forwarding address.
Failure to Return Security Deposit as Required: If the landlord refuses or fails to return the security deposit within the 30-day limit, the tenant stands to recover up to double the withheld sum, plus any legal fees associated with recovering the deposit in court.
Unclaimed Deposits: Tenants have six months from the termination of the lease agreement to claim a returned security deposit if they do not provide a forwarding address. If they do not claim the funds within six months, the landlord is entitled to retain the balance without additional obligation.
Security Deposits and Tax Filing in New Hampshire
Whether a security deposit will be treated as taxable or not depends on if the deposit is used or returned.
Taxable Income: Security deposits are not automatically considered income upon collection at the beginning of tenancy. They only become taxable income when the landlord no longer has any obligation to refund them (such as for settling damages incurred). At this point they may also qualify as a write-off for tax purposes as well.
Reporting Security Deposit as Income: Whether or not security deposit should be reported as income and when to do so will depend on what it is being applied to or used as. Below are three simple rules the IRS has suggested:
- If the deposit is forfeited due to a breach of the lease or applied to unpaid rent, then the amount kept should be declared as income in the year it was forfeited or applied.
- If the security deposit is used to cover expenses that are chargeable to it, then the landlord should only include the part of the deposit used as income if the landlord includes the cost of repairs as expenses. If the landlord doesn’t include them as expenses as a matter of practice, then there’s no need to include the part of the deposit kept to cover them as income.
- There is an agreement between the parties to use the deposit or part of it as the final month’s rent, then the landlord should include it as income when the same is received.
Additional Rules & Regulations in New Hampshire
Notice of Repairs or Corrections: When collecting a security deposit, landlords should provide notice of the tenant’s right to report any conditions that need to be remedied within five days of occupancy.
New Property Owner’s Responsibility: 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 five days after the transfer occurs, but before the tenancy has expired. The landlord must provide notice through registered or certified mail to the tenant of the transfer and provide contact information for the receiver of the deposit.
For additional questions about security deposits in New Hampshire, please refer to the official state legislation, New Hampshire Landlord-Tenant Statutes.