North Carolina’s security deposit law plays a key role in helping landlords avoid making unclear deductions or missing return deadlines that can cause drama with tenants.
This guide explains everything landlords need to know about these rules, including maximum deductions they can make, proper storage methods, whether interest applies, legal reasons to deduct, returning deposits, handling tenant disputes, and more.
Statutes Regulating North Carolina Security Deposits
Article 6 of Chapter 42 of the North Carolina General Statutes, also known as the Tenant Security Deposit Act, outlines the rules that guide how landlords collect, store, and return security deposits.
Maximum Security Deposit Amounts Under North Carolina Law
North Carolina sets firm limits on the amount landlords may collect for security deposits. Week-to-week leases allow landlords to collect deposits up to 2 weeks’ rent, month-to-month leases allow up to 1.5 months’ rent, and longer agreements allow up to 2 months’ rent. These caps apply to all residential rentals regardless of the lease format.
The state also allows separate nonrefundable pet fees under the Tenant Security Deposit Act, creating a single exception to the standard limits. North Carolina does not outline any additional exceptions to its security deposit rules.
Security Deposit Storage Regulations
North Carolina requires landlords to place security deposits in a trust account with a licensed North Carolina financial institution or to secure the funds with a bond. Landlords must also notify tenants within 30 days of the name and address of the institution holding the deposit, as state law requires.
For example, a landlord cannot store a tenant’s deposit in a personal checking account used for routine expenses, since the law requires a separate trust account or an approved bond arrangement.
Security Deposit Interest in North Carolina
North Carolina does not require landlords to hold security deposits in interest-bearing accounts. Landlords may choose an interest-bearing option if it fits their management style, but state law does not require them to pay tenants any interest on the deposit.
Making Security Deposit Deductions
Security deposit deductions help landlords protect the long-term condition of a rental property. Tenants sometimes leave damage beyond normal wear and tear, and landlords need funds available to restore the unit to its previous state and keep the property in reliable operating condition.
When Landlords Can Deduct
North Carolina landlords may draw from a tenant’s security deposit for the following reasons:
- Repair costs for damage beyond normal wear and tear
- Unpaid rent that remains due after the rental period ends
- Cleaning costs needed to return the unit to a reasonable standard
- Unpaid utility bills or service charges assigned to the tenant
- Costs related to re-renting the unit after early lease termination
When Landlords Can’t Deduct
North Carolina landlords may not draw from a tenant’s security deposit for the following reasons:
- Routine wear that occurs through ordinary and expected use
- Damage or conditions that existed before the tenant moved in
- Costs for improvements or upgrades not tied to necessary repairs
- Expenses that result from normal aging or material deterioration
- Fees or charges not authorized under state law or the lease agreement
Necessary Documentation to Accompany Deductions
North Carolina requires landlords to give tenants an itemized written list that explains every deduction taken from the security deposit. State law does not require landlords to include receipts or invoices, but they may add them to provide more detail and help avoid disputes.
What to Do When Deductions are Greater Than the Deposit
Tenants sometimes leave damage that exceeds the amount held in the security deposit. When this happens, landlords may pursue the remaining balance directly from the former tenant. North Carolina requires landlords to send the itemized deduction statement within 30 days, or within 60 days if they need more time to determine the final charges.
If the tenant does not pay the remaining balance, landlords can file a claim through their local North Carolina small claims court.
Returning Security Deposits to Tenants
North Carolina law outlines clear rules for returning any remaining funds from a tenant’s security deposit after all eligible deductions have been made. These steps create transparency and help landlords avoid unnecessary disputes during move-out.
Required Timeline for Return
North Carolina requires landlords to return any remaining portion of the deposit within 30 days after the tenancy ends and the tenant vacates. If landlords need more time to finalize charges, they may extend the process to 60 days, but they must send an interim itemized list within the first 30 days.
Method for Return
Landlords in North Carolina usually return deposits by check or another method both parties agree on. When sending the remaining balance, landlords must include an itemized written list of deductions so tenants understand how the final amount was calculated.
Penalties for Late Return
North Carolina law states that landlords who miss the required return deadline or fail to provide proper documentation may lose the right to keep any part of the deposit. Courts may also award attorney fees to tenants in cases where landlords wrongfully withhold funds.
Security Deposit Disputes
If a tenant disagrees with how a landlord handles a security deposit, the tenant has the right to raise a dispute. Tenants usually begin by requesting clarification, and if the issue continues, they may pursue mediation or file a claim in small claims court.
As a landlord, prepare for security deposit disputes by using move-in and move-out checklist tools, staying current with accounting and bookkeeping, and including clear terms in your lease agreement. Strong documentation, regular inspections, and careful attention to North Carolina timelines can only work in your favor.
Using Condition Reports to Document Damage
Managing security deposits in North Carolina becomes far simpler when landlords use detailed condition reports to document the unit’s condition before and after a tenancy, reduce disputes, and set clear expectations for both new and departing tenants.
To streamline this process, use property management software to create digital reports, including photos and videos, directly from a smartphone. Careful documentation before move-in and after move-out makes it difficult for tenants to challenge lawful security deposit deductions.
Sign up for a free TurboTenant account to create organized reports, simplify inspections, and handle every deduction confidently.
FAQs: North Carolina Security Deposit Law
Can a landlord deduct painting from a security deposit in North Carolina?
Landlords may deduct painting costs only when a tenant causes damage that goes beyond normal wear and tear. Routine touch-ups or faded paint do not qualify. Any deduction must focus on restoring the unit to its previous condition and comply with state rules on itemization and timelines.
Are nail holes considered normal wear and tear in North Carolina?
Small nail holes usually count as normal wear and tear in North Carolina, so landlords typically cannot deduct for simple patching. Larger holes or excessive wall damage can qualify as tenant-caused damage, allowing landlords to deduct repair costs when the charge is reasonable and well-documented.
Does the landlord or tenant have to pay for carpet cleaning in North Carolina?
Routine carpet cleaning tied to ordinary use counts as normal wear and tear, so landlords cannot charge tenants for standard cleaning. When tenants leave stains, damage, or heavy soil beyond normal wear and tear, landlords may deduct cleaning or repair expenses (provided they do so in line with state requirements).
What happens if a landlord doesn’t return a security deposit within 30 days in North Carolina?
If a landlord does not return the deposit or provide the required itemization within 30 days, or within 60 days when extra time applies, they may lose the right to keep any portion of the deposit. Courts may also award attorney fees to tenants in cases of wrongful withholding.
