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What is the North Carolina Tenant Security Deposit Act?


If you have decided to rent your property in North Carolina, you need to understand your rights and responsibilities as a landlord under North Carolina landlord and tenant law. North Carolina has passed laws that clearly define the rights, duties, and responsibilities of both the landlord and the tenant. These laws are designed to protect both parties in a rental agreement. One specific area of tenant and landlord law addresses deposits received by the landlord from the tenant.

It is a common misconception that the security deposit received by the landlord belongs to the landlord. In reality, any security deposit paid by the tenant belongs to the tenant. The landlord is simply holding the deposit in trust until the rental agreement is terminated. Landlord and tenant law in North Carolina is very clear regarding security deposits for residential rental property.

North Carolina’s Tenant Security Deposit Act

The North Carolina Tenant Security Deposit Act sets forth the duties, rights, and responsibilities of landlords regarding a tenant’s deposit. Below are some of the most common questions landlords and tenants have about security deposits in North Carolina.

What does the landlord do with the tenant’s security deposit?

According to landlord and tenant law, the landlord must deposit the tenant’s security deposit in a trust account with an insured and licensed bank in North Carolina. The landlord can choose to furnish a bond from an insurance company licensed to operate in North Carolina. If the landlord chooses to deposit the security deposit in a trust account outside of the state, the landlord must provide the tenant with an adequate bond in the amount of the deposit.

Is the landlord required to notify the tenant of the location of the security deposit?

Yes, the landlord or his agent must notify the tenant of the name and address of the bank or institution where the security deposit is located or notify the tenant of the name of the insurance company providing the bond.

Can the landlord use the security deposit for any reason?

No, North Carolina landlord and tenant law limits the uses for the security deposit. Acceptable uses for a security deposit include:

  • Unpaid rent or utilities (water, sewer, or electricity)

  • Damage to the rental property

  • Damages for breaking the lease except where the tenant is forced to leave due to a violation by the landlord

  • Unpaid bills that become a lien against the rental property

  • Costs of re-renting premises following a breach by the tenant

  • Costs of removing and storing the tenant’s property following a summary ejectment proceeding

  • Late fees (to the extent provided by law)

  • Court costs and any fee permitted by G.S. 42-46

Is there a maximum amount of security deposit that a landlord can charge?

Yes. The security deposit can an amount equal to two weeks’ rent if the rental agreement is a week-to-week term; one and one-half month’s rent for month-to-month terms; and, two months’ rent for any rental agreements longer than month-to-month.

When the rental agreement or lease terminates, what happens to the security deposit?

Under North Carolina landlord and tenant law, the landlord must return the deposit within 30 days of the end of the rental agreement. If the landlord does not return the full security deposit, the landlord must provide a detailed accounting for the amount of the security deposit not being returned to the tenant within the 30 day period. The landlord may only retain the portion of the security deposit that covers the allowable costs.

Are forfeiture clauses enforceable in North Carolina?

At this time, forfeiture clauses in rental agreements that allow the landlord to keep more of the security deposit than is needed to cover the actual costs permitted by law is not enforceable under North Carolina landlord and tenant law.

Contact an Experienced Jacksonville Landlord and Tenant Law Attorney

“Attorneys Who Aggressively Protect Your Rights”

The landlord and tenant law attorneys of The Trevor J. Avery Law Firm can assist you with drafting a rental agreement that protects your rights as a landlord. If you are a landlord in North Carolina, you want to ensure that your legal rights as a property owner are protected while limiting your liability in the event of a problem with the tenant. Our landlord and tenant law attorneys understand the laws governing rental property in North Carolina. We can help protect you and protect your property.

We represent clients throughout Duplin County, Onslow County and the surrounding communities. Call our office at (910) 405-8459 or contact us online today for a free case evaluation.