New Mexico’s security deposit law sets clear rules for deductions, deadlines, and documentation. Landlords who understand these requirements handle deposits correctly, reduce confusion, and stop disputes before they start.
This guide covers the core rules landlords must follow, including maximum deposit amounts, storage requirements, interest obligations, allowable deductions, return timelines, and how to handle disagreements about deposits.
Statutes Regulating New Mexico Security Deposits
New Mexico’s security deposit laws appear in Section 47-8-18 of the New Mexico Statutes Annotated, which outline deposit limits, proper handling, and requirements for timely returns.
Maximum Security Deposit Amounts Under New Mexico Law
New Mexico limits security deposits to 1 month’s rent for rental agreements lasting 1 year or less. For leases longer than 1 year, state law does not set a specific maximum, giving landlords more flexibility in setting the deposit amount.
If a landlord collects more than 1 month’s rent as a security deposit, New Mexico law requires the landlord to pay annual interest on the portion that exceeds 1 month’s rent. The statute does not provide additional exceptions to these rules.
Security Deposit Storage Regulations
New Mexico does not outline specific rules for how landlords must store security deposits. The law does not require a separate account, a particular type of bank, or a receipt. With no storage standards in place, property owners may hold deposits however they see fit.
Security Deposit Interest in New Mexico
New Mexico requires landlords to pay annual interest only if a deposit exceeds 1 month’s rent. While the deposit need not be held in an interest-bearing account, landlords must provide interest at the passbook savings rate and pay it to the tenant at the end of each rental year.
Making Security Deposit Deductions
Making fair security deposit deductions helps landlords protect the condition of a rental property. Tenants sometimes default on rent or leave damage that goes beyond normal wear and tear, and landlords need funds to complete repairs and prepare the unit for the next renter.
When Landlords Can Deduct
New Mexico landlords may draw from a tenant’s security deposit for the following reasons:
- Repair damage beyond normal wear and tear that occurred during the tenancy
- Recover unpaid rent that remains outstanding at move-out
- Cover cleaning costs needed to restore the unit to move-in condition
- Replace items or fixtures missing from the property at lease end
- Address financial losses tied to documented lease violations
When Landlords Can’t Deduct
New Mexico landlords may not draw from a tenant’s security deposit for the following reasons:
- Address wear that results from ordinary and expected daily use
- Cover routine maintenance the property needs, regardless of the tenant
- Pay costs created by landlord delays, mistakes, or neglected repairs
- Fund improvements or upgrades that raise the property’s value
- Charge tenants for conditions that existed before they moved in
Necessary Documentation to Accompany Deductions
New Mexico requires landlords to give tenants an itemized written list of all security deposit deductions. State law does not require receipts, invoices, or other supporting documents, though landlords may include them to bolster their records and reduce the chances of a dispute.
What to Do When Deductions are Greater Than the Deposit
Tenants sometimes owe unpaid rent or leave damage that costs more to repair than the amount held in the security deposit. When this happens, New Mexico landlords may request the remaining balance from the former tenant after they calculate the full charges. State law requires landlords to deliver the itemized deduction list within 30 days to clarify any outstanding charges.
If the tenant refuses to pay, landlords may enlist a collections agency to pursue the matter or file a claim in their local New Mexico small claims court.
Returning Security Deposits to Tenants
New Mexico law outlines how landlords must return any remaining portion of a tenant’s security deposit after making lawful deductions. These rules encourage an organized turnover at the end of each tenancy.
Required Timeline for Return
New Mexico requires landlords to return the remaining deposit within 30 days after the tenant vacates and the landlord regains possession of the unit. The 30-day clock starts once the tenant moves out. During this period, landlords must also provide the tenant with a complete, itemized list of deductions.
Method for Return
New Mexico does not require a specific payment method, so that landlords may return the deposit by check, electronic payment, or another reasonable option. Landlords must include the itemized deduction list with the payment so the tenant understands how the final amount was calculated.
Penalties for Late Return
If a landlord misses the 30-day deadline or fails to include the itemized deduction list, New Mexico law allows the tenant to recover the full deposit, plus an additional $250 in statutory damages. Landlords may also face responsibility for the tenant’s attorney fees and court costs.
Security Deposit Disputes
If a tenant disagrees with how a landlord handled their security deposit, they have every right to raise a dispute. Tenants usually start by reviewing the itemized deductions, requesting written clarification, and, if needed, pursuing mediation or filing a claim in court to settle the matter.
Landlords can prepare for security deposit disputes by using move-in and move-out checklist tools, maintaining strong accounting and bookkeeping, and including clear terms in all lease agreements. Maintaining thorough documentation, regularly reviewing New Mexico requirements, and adhering to all timelines all help to prevent disputes from escalating.
Using Condition Reports to Document Damage
When managing security deposits in New Mexico, landlords should always use move-in and move-out condition reports to document the condition of a rental unit. These reports help landlords accurately track damage, avoid confusion with tenants, and simplify decisions regarding deductions or repairs.
To simplify the process, many landlords use property management software to create digital reports with photos and videos from their smartphones. Clear before-and-after records provide landlords with solid evidence and make security deposit deductions far less open to debate.
Sign up for a free TurboTenant account to streamline property inspections and keep every report organized, secure, and accessible.
FAQs: New Mexico Security Deposit Law
Can a landlord deduct painting from a security deposit in New Mexico?
A landlord may deduct painting costs only when a tenant leaves damage that goes beyond normal wear and tear. Standard repainting that landlords complete between tenants counts as a routine expense and does not qualify as a valid deduction.
Are nail holes considered normal wear and tear in New Mexico?
Yes. Small nail holes that come from reasonable decorating typically qualify as normal wear and tear in New Mexico. Because these marks occur naturally during a tenancy, landlords cannot deduct repair costs for them.
Does the landlord or tenant have to pay for carpet cleaning in New Mexico?
A landlord covers routine carpet cleaning as part of regular turnover. However, if a tenant leaves heavy staining, odors, or clear damage beyond normal wear and tear, the landlord may deduct the cost of cleaning or repairs from the security deposit.
What happens if a landlord doesn’t return a security deposit within 30 days in New Mexico?
If a landlord misses the 30-day deadline or fails to provide the itemized statement, the tenant may recover the full deposit, plus $250 in statutory damages, along with reasonable attorney fees and court costs.
