Written by attorney Kenneth Love Jr.

North Carolina Security Deposits-Residential Leases

A common concern of North Carolina tenant is payment and refund of their tax return. Governed by the North Carolina Security Deposit Act, codified as Article 6 of Chapter 42 of the North Carolina General Statutes; fortunately, the law gives us clear guidance into the rules concerning security deposit payment and returns.

First, security deposits are 100% refundable. Lease terms that require the security deposit to be non-refundable are unenforceable. Once the landlord collects the security deposit, they must put it into a trust account and within 30 days, report the name and location of the bank holding the account to the tenant.

Just as important is the amount that the landlord is allow to collect.

  1. 2 weeks rent for a week to week tenancy

  2. 1 and a half months rent for a month to month tenancy

  3. 2 months rent for any term longer than a month

It is a violation of the law for a landlord to collect more than these amounts.

There is one exception to the above rules: the dreaded pet deposit.

Landlords do have the right to collect a non-refundable pet deposit. The deposit should be noticed up front to the tenant and should be reasonable. However, the law does not set maximum limits on the amount landlords can charge. The policy behind the pet deposit being non refundable is that the chances of a pet causing damage by staining the carpets, scatching walls, leaving fleas, or causing other damage is very likely. Also keep in mind that if a pet causes damage in value above the deposit, the landlord is entitled to the extra amount upon move out.

So, the time comes to move out and the tenant wants the security deposit back...what next?

The tenant has the duty to move out of the home, leaving it in the same condition as he/she found it in. The landlord has 30 days to review the property and determine if there is any damage or any charges that should be applied to the security deposit. By the end of the 30 days the landlord must return the deposit, an explaination of how the deposit was used, or a partial deposit with the appropriate explaination.

The law is clear as to what charges a landlord may use the deposit for:

§ 42-51. Permitted uses of the deposit.

(a) Security deposits for residential dwelling units shall be permitted only for the following:

(1) The tenant's possible nonpayment of rent and costs for water or sewer services provided pursuant to G.S.

62-110(g) and electric service pursuant to G.S. 62-110(h).

(2) Damage to the premises, including damage to or destruction of smoke alarms or carbon monoxide alarms.

(3) Damages as the result of the nonfulfillment of the rental period, except where the tenant terminated the

rental agreement under G.S. 42-45, G.S. 42-45.1, or because the tenant was forced to leave the property

because of the landlord's violation of Article 2A of Chapter 42 of the General Statutes or was constructively

evicted by the landlord's violation of G.S. 42-42(a).

(4) Any unpaid bills that become a lien against the demised property due to the tenant's occupancy.

(5) The costs of re-renting the premises after breach by the tenant, including any reasonable fees or

commissions paid by the landlord to a licensed real estate broker to re-rent the premises.

(6) The costs of removal and storage of the tenant's property after a summary ejectment proceeding.

(7) Court costs.

(8) Any fee permitted by G.S. 42-46.

(b) The security deposit shall not exceed an amount equal to two weeks' rent if a tenancy is week to week, one

and one-half months' rent if a tenancy is month to month, and two months' rent for terms greater than month

to month. These deposits must be fully accounted for by the landlord as set forth in G.S. 42-52. (1977, c.

914, s. 1; 1983, c. 672, s. 3; 2001-502, s. 5; 2004-143, s. 6; 2011-252, s. 3; 2012-17, s. 4; 2012-194, s.

59 (a), (b).)

This is the exact language of the statute. The law does not approve of any other uses for the deposit.

If the deposit is not returned and the tenant feels that it should have been, he/she can sue in small claims court for its return. The law also allows the tenant to recieve the payment of attorney fees if he/she wins.

Additional resources provided by the author This is a link to the language of the law on the General Assembly's website.

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