Overview
North Carolina's Tenant Security Deposit Act provides a clear framework for how landlords must handle security deposits. The law sets deposit limits based on the type of tenancy and requires landlords to hold deposits in trust accounts at licensed financial institutions.
This guide covers everything landlords and tenants need to know about security deposits in North Carolina.
Deposit Limits
North Carolina law sets the following security deposit limits:
- Fixed-term leases: Maximum of 2 months' rent
- Month-to-month tenancies: Maximum of 1.5 months' rent
- Week-to-week tenancies: Maximum of 2 weeks' rent
- Pet deposits: Landlords may charge a reasonable, nonrefundable pet deposit in addition to the security deposit
Deposit Holding Requirements
Landlords must either:
- Hold the deposit in a trust account at a licensed and insured bank or savings institution in North Carolina, or
- Furnish a bond from an insurance company licensed to do business in the state
The landlord must notify the tenant within 30 days of the beginning of the lease of the name and address of the bank where the deposit is held, or the name of the insurance company providing the bond.
Allowable Deductions
Landlords may only deduct from the security deposit for the following reasons:
- Unpaid rent: Any rent owed at the time of move-out
- Damage beyond normal wear and tear: Costs to repair tenant-caused damage
- Cleaning costs: Costs to return the unit to its move-in condition, beyond normal wear
- Unpaid utility bills: If the tenant is responsible under the lease and failed to pay
- Early termination costs: Costs incurred due to the tenant breaking the lease, as permitted by the lease agreement
What Constitutes Normal Wear and Tear?
Normal wear and tear includes:
- Minor scuffs on walls
- Small nail holes from hanging pictures
- Worn carpet from regular use
- Faded paint due to sunlight
- Minor marks on floors from furniture
Damage beyond normal wear and tear includes:
- Large holes in walls
- Stained or burned carpet
- Broken windows or fixtures
- Pet damage (scratches, stains, odors)
- Excessive filth requiring professional cleaning
Return Timeline
Landlords must return the security deposit within 30 days of the tenant vacating the unit. The return must include:
- The remaining deposit amount (if any deductions were made)
- An itemized written statement listing each deduction and the amount
- The statement must be sent to the tenant's last known address
If the landlord's itemized statement shows that the deposit is insufficient to cover the deductions, the landlord may send the statement along with a request for the additional amount owed. The landlord has 60 days if the damage involves the tenant's pet deposit or if repairs require extended time and the landlord provides an interim accounting within 30 days.
If the landlord fails to return the deposit or provide the required documentation within 30 days, the tenant may recover the full deposit amount.
Pre-Move-Out Inspection
North Carolina law does not require landlords to conduct a pre-move-out inspection. However, conducting one can help both parties avoid disputes.
Best practices include:
- Conducting a walkthrough with the tenant before move-out
- Documenting the condition of the unit with photographs or video
- Comparing the move-out condition to the move-in condition report
- Allowing the tenant an opportunity to address any issues before the final accounting
Dispute Resolution
If a tenant believes their deposit was wrongfully withheld, they can:
- Send a demand letter to the landlord requesting the return of the deposit
- File a claim in Small Claims Court (up to $10,000)
- File a complaint with the North Carolina Attorney General's Consumer Protection Division
If the court finds that the landlord acted in bad faith by failing to return the deposit or provide the required itemized statement, the tenant may be awarded the full deposit amount. In an action brought by the tenant, the court shall award court costs and reasonable attorney's fees to the prevailing party.