What is a Security Deposit?
By definition, a security deposit is a sum of money given to the landlord to ensure that rent will be paid and other responsibilities of the lease performed. Such responsibilities include: paying for damages to the premises caused by the tenant, covering any unpaid bills, and the cost of re-renting the premises after breach by the tenant. The laws surrounding security deposits vary from state to state. Landlords must follow state law when handling tenant’s security deposit, which means using it only for certain expenses and returning it tenants in a timely manner.
North Carolina Law
North Carolina requires that security deposits from the tenant in residential dwelling units be deposited in a trust account with a licensed and federally insured depository institution lawfully doing business in this state. Security deposits from the tenant may be held in a trust outside of North Carolina only if the landlord provides the tenant with adequate bond in the amount of said deposits. Landlords or their agents are required to notify tenants within thirty days after the beginning of the lease term of the name and address of the bank or institution where their deposit is currently located or the name of the insurance company providing the bond.
When Can a Landlord Withhold Security Deposits?
As a tenant and as a landlord, it is important to be privy to landlord’s obligations to security deposit guidelines. Below is a list of scenarios detailing when a landlord is prohibited from keeping security deposits and when he must return them.
Remedies for Getting Deposits Back
A tenant is allowed to institute a civil action to require the accounting of and the recovery of balance of a deposit if the landlord (or landlord’s successor) in interest fails to account for and refund the balance of the tenant’s security deposit pursuant to this Article. The failure of a landlord to comply with the deposit, bond, or notice requirements of this Article shall nullify the landlord’s right to retain any part of the tenant’s security deposit as otherwise permitted under G.S. 42-51. Additionally, the tenant may recover damages resulting from noncompliance by the landlord. Such damages include cost for an attorney and court fees.
The majority of states hold landlords to strict guidelines as to the appropriate circumstances in which they must return security deposits. Landlords who violate these laws can be held to stiff penalties.
A security deposit is usually in the amount of one or two months' rent. It usually must be paid at the time that the Landlord and Tenant sign the lease. The landlord must place the funds in an escrow account and give the tenant any interest generated by such funds. Upon the termination of the lease, the landlord must return the security deposit to the tenant if no violations of the lease occurred. He or she may keep the security deposit or portion thereof for the amount of any damages, which can be proven, pursuant to the terms of the lease.
Basic “Wear and Tear” versus Excessive Damage
The general rule is that you are not responsible for normal wear and tear. For example, if the dishwasher must be replaced because it has simply worn out, that's the landlord's responsibility. See the bottom of this article for examples of repairs and damages that can and cannot be deducted from your security deposit.
If you or your guest cause damage by your unreasonable carelessness or deliberate misuse, however, you must pay for it. The cost of replacing the dining room carpet because you and your friends thought those pizza and BBQ sauce stains would magically disappear is probably on you. You must leave a rental unit at least as clean as it was when you moved in.
Because "normal wear and tear" can be interpreted in many different ways, disputes often arise. The bottom line is that the better you itemize and document the condition of your unit when you move in, the better case you'll have against a landlord who tries to gouge you on the way out.
Landlords are typically required to return security deposits within 14 to 30 days after you move out. The landlord must send, to your last known address, either:
Your entire deposit (plus interest, in some states and in some cities), or:
A written, itemized statement describing how the deposit was applied to back rent, cleaning, or repairs, plus the remainder of the deposit.
How To Get It Back
If your landlord fails to return your deposit when and how the law requires, you can sue the landlord in small claims court. If the landlord has intentionally and flagrantly violated the law, in some states, you can recover two or three times the amount of the deposit, plus attorneys' fees and other damages.
Ordinary Wear & Tear (Landlord’s Responsibility)