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.