North Carolina

Security Deposit Amount

The amount a landlord can charge for a security deposit in North Carolina depends on the length of the lease:

• Week-to-Week Tenancy: Maximum of two weeks’ rent.
• Month-to-Month Tenancy: Maximum of 1.5 months’ rent.
• Leases Longer than Month-to-Month: Maximum of two months’ rent.

Landlords can also require an additional "reasonable" non-refundable pet deposit if pets are allowed.

Options for Holding

Landlords in North Carolina are required to hold security deposits in one of the following ways:

• ‍Trust Account: The deposit must be placed in a trust account with a licensed and insured bank or savings institution located in North Carolina.‍
• Bond: As an alternative to holding the deposit in a trust account, the landlord can purchase a bond from an insurance company licensed to do business in North Carolina. This bond must be in the amount of the security deposit and be filed with the Clerk of Superior Court in the county where the rental property is located.

Notification Requirements

Landlords are required to provide tenants with the name and address of the bank or financial institution where the security deposit is being held within 30 days of the beginning of the lease term. If the landlord chooses to use a bond instead of a trust account, the tenant must be informed of this option within the same timeframe.

Payment of Interest Earned

North Carolina law does not require landlords to pay interest on security deposits. If the deposit is held in an interest-bearing account, the landlord is not obligated to pass any earned interest on to the tenant.

Timeline for Returning

Landlords must return the security deposit, or any remaining balance after deductions, within 30 days after the tenant vacates the property. If the landlord needs additional time to complete repairs, they may provide an interim accounting within 30 days and return the remaining balance of the deposit within 60 days.

Claims Process

You must provide the tenant with an itemized list of all deductions from the security deposit within 30 days of the lease termination and the tenant vacating the property. This statement must include specific amounts and descriptions of each deduction.

If you cannot finalize all deductions within the 30-day window (e.g., awaiting contractor estimates or completing repairs), you are allowed to send an interim accounting. You must then provide the final itemized statement and return any remaining balance within 60 days.

If a tenant believes their security deposit has been wrongfully withheld, they can file a claim in small claims court. The tenant may seek the return of the deposit and possibly additional damages if the landlord is found to have acted in bad faith.

Landlords in North Carolina may deduct from the security deposit for the following reasons:

• Unpaid rent or utility bills
• Damage to the property beyond normal wear and tear
• Costs of cleaning the property to return it to the condition it was in at the start of the tenancy (except for normal wear and tear)
• Costs for the removal of any abandoned property left by the tenant
• Any other charges specified in the lease agreement

The landlord must provide an itemized list of all deductions along with any remaining deposit balance when returning the deposit.

Loss of Deduction Rights: If a landlord fails to comply with the requirement to provide an itemized list of deductions within the specified 30-day period, they forfeit the right to withhold any portion of the security deposit. This means the tenant could be entitled to the full return of the deposit, regardless of any damages or unpaid rent.

Double Damages: If a landlord wrongfully withholds any portion of the security deposit, the tenant may sue the landlord in small claims court. If the court finds that the landlord wrongfully withheld the deposit or part of it, the landlord may be ordered to pay the tenant damages equal to twice the amount wrongfully withheld. This penalty is designed to discourage landlords from improperly retaining deposits.

Attorney’s Fees: In cases where the landlord is found to have wrongfully withheld the deposit, they may also be required to pay the tenant’s reasonable attorney’s fees, further increasing the financial consequences.

Foreclosure: If the property is foreclosed, the new owner becomes responsible for the security deposit.

Military Service: Tenants who are service members have additional protections under federal law, including possible early lease termination, which may affect the handling of their security deposit.

Natural Disasters or Damage: If the rental property becomes uninhabitable due to a natural disaster or other significant damage, tenants may be entitled to a return of their security deposit.