Key Takeaways

• North Carolina limits security deposits based on the type of rental agreement. Landlords can generally charge up to one-half month's rent for week-to-week tenancies, one and a half months' rent for month-to-month tenancies, and two months' rent for longer-term leases.
• Security deposits must be handled according to specific state requirements. Landlords can generally hold deposits in a qualifying trust account or secure them with a bond and must provide tenants with information about where the deposit is being held.
• Landlords can make deductions for certain unpaid costs. Permitted deductions may include unpaid rent or bills, lease violations, excessive property damage, certain court costs, and expenses associated with removing and storing a tenant's belongings.
• Security deposits must be properly accounted for after move-out. Landlords generally have 30 days to return the deposit or provide an interim accounting when final costs cannot yet be determined, with a final accounting required within the applicable timeframe.
• Following North Carolina security deposit laws is essential for landlords. Failing to follow the required procedures can affect a landlord's ability to make deductions and may result in additional financial or legal consequences.

Most North Carolina landlords require that their tenant payment of a deposit when occupying a rental premises. 

North Carolina tenant security deposits act as a safety net against any financial damage that may occur because of a tenant’s negligent or careless actions, such as property damage exceeding normal wear and tear. 

For example, a typical lease violation is nonpayment of rent money or unpaid rent bills. In such a case, landlords may be able to use part or all of the renter' security deposits in North Carolina to cut your losses and get your rental premises ready for re-renting. 

In other cases, it's smart to have landlords insurance with an insurance company. Other instances where a renter's deposit balance can come be useful for landlords include:

• In case of excessive damage exceeding normal wear and tear
• When a renter moves out without clearing their utility bills from the rental period
• When a tenant fails to adhere to the lease or breaks their rental property lease contract without having a legal justification
• Re-renting the property to another tenant without your knowledge

On your part, the North Carolina law for security deposit law requires you, the North Carolina landlord, to abide by certain rules. Violations of such rules can result in forfeiture of your right to make any deductions to the security deposits balance after the lease term ends.

The following is an overview of North Carolina security deposit laws under the landlord-tenant laws. 

1. Terms of Security Deposit Limits 

There is a limit to how much landlords can charge a tenant as a security deposit in North Carolina. The limit depends on the length of the lease or rental agreement a landlord is operating with. 

Under North Carolina laws, there are certain rules about what landlords can charge, but here are some guidelines.

For tenants on a weekly lease, the maximum amount for security deposits a landlord can ask for is the equivalent of one-half month's rent. For renters on a monthly lease, the most a landlord can reasonable ask is 1.5 times the rent interest. For leases longer than that, the maximum deposit balance to request should be the equivalent of two months’ rent. 

2. Pet Deposits Under North Carolina Laws

Landlords can also charge their tenants a animal deposit under North Carolina laws. $200 is a typical amount to charge as a animal deduct security deposit balance. Tenant's security deposits deductions and pet deposits are not the same when making deductions.

However, please note that disabled tenants are exempt from paying any fees in regard to their service animals. A tenant's security deposit should not be bigger than another's simply because of their disability. 

Under North Carolina law, disabled tenants are entitled to full and equal access to housing as per the Fair Housing Act. 

For property damages caused by the service animal, the tenant will become liable for paying them, but no pet deposit is allowed. 

If the renter or tenant has insurance, the insurance company may even make payments for the property damages instead of having to deduct anything. Please not deductions must be reported upon return of the deposit interest.

3.  Making Security Deposit Deductions

North Carolina landlords may be able to keep all or part of their tenant’s security deposit for any of the following reasons during tenancy. 

• Small claims court costs
• Costs of finding a replacement tenant after the tenant moves out
• Breach of the terms of the lease
• Unpaid bills
• Unpaid rent
• Costs of removing and storing tenant’s possessions after an eviction
• Property damage costs exceeding normal wear and tear that may need to deduct.

4. Terms of Security Deposit Storage

In North Carolina, landlords have two options when it comes to storing your tenant's security deposit. One way of storing funds per North Carolina security deposit laws is by storing it in a trust account. The account must be in a licensed or insured financial institution located in the state of North Carolina. 

But, there's another option other than having a trust account. Posting it as a bond equal to the amount of the North Carolina security deposit is another way to store the deposit. North Carolina security deposit law is very adamant about these being the only two options.

5. North Carolina Tenant Rights (Security Deposit Receipt)

Landlords have a responsibility to notify their tenants property after receipt of the tenant's security deposit. North Carolina deposit law states that a landlord must do this within a period of 30 days or else they lose any and all rights to their tenant's deposit.

If landlords fail to do this, they cannot begin the process again.

In the notice, a landlord must let them know the name and address of the insured bank or financial institution where you’re storing it. 

6. North Carolina Rental Security Deposit Law

The monthly rent payments and security deposit serve two different purposes. As such, unless both parties agree for it to be done through a written lease agreement, a tenant must not use their deposit as last month’s rent as you may need to deduct from it. 

7. Itemized Security Deposit Return

Once the term has ended, a landlord has 30 days to return the deposit back to the tenant. If a landlord has made deductions, they’ll have to provide their tenant with a written itemized list of the same. 

The list must be written and delivered to the tenant alongside the remaining portion of the deposit within 30 days. 

If you’re unable to determine the costs of deductions, a landlord must mail their tenant an interim list no later than 30 days upon termination. That said, you’ll have a maximum of 60 days to provide your tenant with the final accounting after the deductions and deposit and any interest is transfered back. 

8. Failure to Return the Security Deposit on Time

If a landlord fails to return the tenant's security deposit on time, you’ll be in violation of the terms of the lease or rental agreement. As such, a tenant may choose to sue their landlord to recover the security deposit amount. 

If found guilty, you’ll forfeit any rights to withhold any portion of your tenant’s deposit. In addition, the court may also order the landlord to make payments for the court costs, as well as attorney fees. 

9. Unknown Forwarding Address

In the case that a landlord cannot find their tenant’s new address, they're only obligated to hold the security deposit for at least 6 months. After 6 months without the address, you’ll no longer be responsible for storing it, and will be yours to keep. 

10. Exchange of Property Ownership

If a landlord sells or transfers their rental properties during an active tenancy, they’ll only be released from all liability for the security deposit upon taking one of the two options below. 

One option is to transfer the rent deposit (or the remaining deposit) to the incoming North Carolina landlord or new rental property owners of the rented premises. After doing so, a landlord must also notify the tenant of the transfer, as well as the incoming landlord’s name and address. 

Once this is done, the incoming landlord becomes liable for all obligations regarding the security deposit. The other option is to return the deposit (or whatever remains of it) to the tenant. 

11. Cleaning Fee

If the rental and lease agreement allows it, a landlord can charge a cleaning fee that does not extend to their tenant's rented premises during the tenancy. 

Otherwise, it’d be illegal for a landlord to charge your NC tenant a cleaning fee or take it from the renter's security deposit. This is said under North Carolina general statutes pertaining to the tenant security deposits act.

Bottom Line

If you own a rental property in North Carolina, charging rent money and a security deposit is a must, to ensure a proper rental income. If you're a landlord who needs help navigating the law or stating your terms on the rental or lease agreement, give KRS Property Management a call today and we'll help you navigate it all!

We offer a free rental pricing analysis, contact us today!

Disclaimer: This blog isn’t a substitute for professional legal advice. Laws change and the information herein may not be updated at the time you read it. If you have specific questions, kindly get in touch with a qualified attorney or an experienced rental management company. 

Frequently Asked Questions

How much can a landlord charge for a security deposit in North Carolina?

North Carolina limits security deposits based on the length of the rental agreement. The maximum is generally one-half month's rent for week-to-week leases, one and a half months' rent for month-to-month tenancies, and two months' rent for leases longer than month-to-month.

What can a landlord deduct from a security deposit in North Carolina?

Depending on the circumstances, landlords may be able to deduct unpaid rent or bills, costs associated with certain lease violations, court costs, and property damage beyond normal wear and tear. The deductions must comply with North Carolina's security deposit requirements.

How must landlords store security deposits in North Carolina?

North Carolina landlords generally have two options for holding security deposits: placing the funds in a qualifying trust account or securing the deposit with a bond. Landlords must also provide the tenant with required information about where the deposit is being held.

How long does a landlord have to return a security deposit in North Carolina?

Landlords generally have 30 days after the tenancy ends to return the security deposit and provide an itemized accounting of deductions. If the final costs cannot be determined within that period, an interim accounting may be provided, followed by a final accounting within the legally permitted timeframe.

What happens if a landlord does not follow North Carolina security deposit laws?

Failing to follow the state's security deposit requirements can affect a landlord's ability to retain deductions from the deposit. Depending on the circumstances, tenants may also pursue legal remedies, including recovery of the deposit and potentially other costs or fees.