When it comes to the security deposit, North Carolina landlords must strictly adhere to the tenants security deposit law. North Carolina security deposit laws stipulate how landlords should handle a tenant’s security deposit.
If a security deposit is handled incorrectly, North Carolina landlords may forfeit their right to keep the tenants deposit, even if it is for unpaid bills or rent. If you are a North Carolina landlord, here are the basics of the North Carolina security deposit law you need to know about.
Reasons for Keeping a Tenant’s Security Deposit
According to North Carolina's security deposit law, a North Carolina landlord is permitted to keep a tenants North Carolina security deposit for any of the following reasons:
- Late fees (to the extent permitted by law)
- Court costs
- Costs of removal and storage of renter’s property after summary ejectment
- Costs of re renting the premises after a breach by the tenant
- Unpaid bills that have become a lien on the premises
- Damages as a result of nonfulfillment of the rental period that is not normal wear and tear
- Damages to the premises
- Nonpayment of rent or costs for utility services on the premises.
Importantly, the damages to the North Carolina premises made by tenants must be considered excessive in order to make deductions from the security deposit a tenant paid per North Carolina landlord tenant law. These damages from tenants are beyond “normal wear and tear”. The following table summarizes the difference between excessive damage by a tenant and damage due to “normal wear and tear” during a tenants' time living on your property per North Carolina law.
| Excessive property damage:
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Damage due to normal wear and tear:
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- Exceptionally filthy premises (in general) requiring extraordinary cleaning
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- Burned out range heating elements
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- Filthy appliances (such as ovens and refrigerators) requiring extraordinary cleaning
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- Small nail holes in walls (from picture hanging)
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- Damaged or chipped countertops
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- Leaking faucets or toilets
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- Loud or unauthorized paint colors
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- Frayed or broken curtain or blind strings
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- Burned spots or stains on carpeting
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- Worn, old or dirty carpeting
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Maximum NC Security Deposit Amount
Under
North Carolina rental law , landlords are limited to the amount they can make a tenant pay for a security deposit. For a month-to-month tenancy, North Carolina landlords can ask a tenant for the equivalent of one and one half months rent as a security deposit in North Carolina.
In North Carolina, for a tenancy longer than two months, a North Carolina landlord can make a tenant pay the equivalent of two months’ rent as a security deposit. Furthermore, if needed, North Carolina landlords can also ask for non-refundable pet deposits from their tenants. The amount a landlord charges their tenant should be reasonable.
Requirements for Security Deposit Receipt
According to North Carolina laws, after receiving their security deposit, a landlord has 30 days to notify the tenant that they received the security deposit from the tenant. Per North Carolina law, a landlord must indicate in the notice where they have stored the tenant's deposit.
Storing a Tenant’s Security Deposit
In North Carolina, a landlord has two options when it comes to storing a renter’s security deposit. One way of storing security deposits is through a bond. The insurance company storing the security deposits as a bond must have a business license in the state.
Another way of storing security deposits for landlords in North Carolina is through a trust account. Similarly, landlord should ensure that the financial institution with the trust account must be located in North Carolina. The financial institution must be insured by an insurance company and licensed.
A Walk-Through Inspection
A
walk-through inspection helps document excessive property damage to your rental property. If there are any, a landlord has a right to make appropriate deductions from the tenant’s deposit. In North Carolina, a walk-through inspection by the landlord is not necessary.
Returning a Tenant’s Security Deposit
In North Carolina, after the lease expires, landlords have 30 days to return the tenant’s security deposit. If landlords miscalculate the deductions, North Carolina’s landlord tenant law gives them an additional 30 days to return security deposits.
Even with the additional 30 days, landlords are still required to immediately give the renter an itemized list of the security deposits' deductions after they move out under the North Carolina laws.
Security deposits oftentimes are a source of conflict between landlords and tenants. Under Noth Carolina Law a tenant may sue even the most meticulous landlord over the return of their security deposit.
To lessen the likelihood of disagreements over deposits here is what landlords should do:
- Perform a move-out inspection. Once the renter vacates, landlords need to thoroughly check the property’s condition. Since a walk-through inspection isn’t necessary for North Carolina, most landlords simply do it themselves.
- Prepare a move-out letter. In the letter, make sure to:
- State how you want the premises returned. Specifically, talk about how you want window coverings, appliances, and floors to look like. You can also preemptively include this information in the lease.
- Describe your procedures for the inspection.
- Outline the deductions that you have a right to charge them for excessive damage.
- Ask them for their mailing address and ask them to return keys.
- Mention how and when you’ll send them the deposit amount or remind them of the return terms you included in the lease.
However, if possible, it’s best to do it together with the tenant. This may help prevent a lot of confusion. The renter may assume they left the premises in excellent condition, but you may disagree.
Ideally, lanlords should have a
move-in checklist to reference. The checklist will help you check for any damages resulting from the tenant’s carelessness of negligence that will affect deposit returns.
During the move-out inspection, check for things such as:
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- Missing blinds
- Missing carbon monoxide detectors or smoke detectors
- Burnt or missing light bulbs
- Fleas and other evidence of bugs
- Holes in doors or walls
- Evidence of smoking or of pets when no pet deposits have been paid
- Strange odors
- Unapproved alterations to the unit
Importantly, deductions to the North Carolina renter’s security deposit amount can only be made if the damage is beyond normal wear and tear. For others, they are just for general upkeep.
- Make an itemized deductions’ statement. After the move-out inspection, prepare an itemized deductions’ list if any. Under the lease or rental agreement, you can make deductions for back rent, repairs, cleaning, or other monetary commitments.
The list should also contain the costs needed to repair the damage. For example, missing door handles – $150. If a landlord has already done the repair work, they should make sure to attach the receipts to the deposit deduction document.
If not satisfied with the deductions made for back rent or repairs, a tenant may sue you in a small claims court. In North Carolina, the amounts sought shouldn’t exceed $5,000.
This generally results when you’ve failed to return the deposit on time. In such a case, if the renter sues and is successful, you may incur hefty penalties. Aside from settling the renter’s court costs, you may be forced to return the full security deposit to them.
Avoid the court at all costs. Look for a mediation service if need be. If all fails, come prepared for the hearing. Remember to have the following:
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- One or two witnesses
- The itemized deposit deductions you sent the tenant including owed rent
- Evidence of any repair work done
- Inventories for move-in and move-out
- Copies of any correspondence between you and the tenant regarding back rent or repairs
- A copy of a signed lease or rental agreement detailing deposit terms
Change in Property Ownership
When the tenant's
property changes hands, landlords must do either of the following with the deposit within thirty days:
- Return all or portion of the security deposit to the tenant. If returning a portion of the deposit, the landlord must include an itemized list of the deductions alongside the deposit.
- Transfer all or portion of the security deposit to the new owner. Next, you must notify the tenant in writing of the same via mail. The notice must also mention the new owner’s address and name.
With these tips, you will now be able to minimize tenant issues arising from security deposits. If you have more questions, about these laws, your property, or your rental agreement, consider hiring the services of a competent North Carolina attorney.
