Key Takeaways
- Security deposits in North Dakota are capped and regulated. Landlords may generally collect up to one month’s rent, with limited exceptions that allow up to two months’ rent, and must follow strict rules on holding, transferring, and returning deposits.
- Landlords may make deductions only for specific, lawful reasons. These include unpaid rent, cleaning beyond normal wear and tear, and damage caused by the resident or their guests, but not ordinary wear and tear.
- Handling security deposits comes with legal responsibilities. Deposits must be held in an interest-bearing account, interest may need to be paid to residents, deposits must be transferred upon sale of the property, and refunds with itemized statements must be provided within 30 days.
A lease agreement outlines key obligations for both parties, such as the lease term, rent responsibilities, and the condition in which the resident must leave the unit. However, issues can arise when a North Dakota resident breaks a lease early, damages the property, or abandons the unit, potentially causing financial loss.
This is where a security deposit helps. It provides landlords with financial protection in these situations. That said, collecting and handling a security deposit comes with legal responsibilities.
In this guide by Personal Touch Property Management, you will learn what North Dakota law allows and prohibits when it comes to security deposits.
Maximum Security Deposit Limit
Landlords in North Dakota have a limit on how much security deposits they can collect from new residents. State law caps that amount to the equivalent of one month’s rent.
The only exception is if the resident has a liability judgment for lease violation or a felony conviction. In such a case, you may be able to charge the resident a security deposit of up to 2 months’ rent.
Additional Pet Deposit
The North Dakota security deposit law allows landlords to charge residents with pets an additional deposit.
The amount must not exceed $2,500 or the equivalent of two months’ rent. You must then use it or a portion of it to cover any excessive damage the pet has caused to the unit. For example, urine stains on carpets, scratches on hardwood floors, smudges on the walls, or shredded curtains.
When charging additional pet deposits, you must exempt disabled residents with assistance animals. This is because assistance animals aren’t pets under both the Federal Fair Housing Act (FHA) and the Americans with Disabilities Act (ADA). Rather, they are working animals with special training.
Security Deposit Holdings
State law defines the manner in which landlords must hold their residents’ security deposits. Specifically, you must hold them in a federally insured account that earns interest. If the lease is longer than 9 months, you must provide the accrued interest to the resident.
These requirements are part of North Dakota’s landlord-tenant laws, which govern how rental funds are handled and help ensure transparency and fairness for both parties.
Sale of Rental Property
After the sale of an occupied rental property in North Dakota, landlords must transfer the deposit to the new owner. This must include any interest accrued on the security deposit amount.
The new landlord will then have to handle the deposit per the statewide security deposit laws.
Acceptable Deductions
In North Dakota, landlords can make deductions from a resident’s security deposit for any of the following reasons:
- Any rent that is still due under the lease agreement. This can happen, for instance, if the resident breaks their lease early for a legally unjustified reason. Such as, after a separation from a partner, need to upsize or downsize, or job relocation.
Such reasons will usually not break the resident’s contractual obligations under the lease.
- Cost of professionally cleaning the unit. Most leases require residents to leave their rental unit in a good state of cleanliness. Specifically, to leave the unit in the same condition they found it in, less normal wear and tear.
For example, when it comes to the kitchen, it must be spotless. The sink should be scrubbed, taps polished, and any watermarks removed. The cabinets should be empty and wiped down, and not have crumbs. The same level of cleanliness should replicate in other areas of the property as well.
- Cost of damage exceeding normal wear and tear. This type of damage results from carelessness, recklessness, or intentional damage by the resident, their relative, or guests. Examples include missing fixtures, broken tiles, torn carpets, or broken tiles.
You shouldn’t, however, charge the resident for any damage arising from ordinary wear and tear. Examples of this type of damage include gently worn carpets, loose door handles, lightly scratched glass, and faded paint.
Security Deposit Returns
In North Dakota, landlords have up to 30 days to return the security deposit to the resident after the lease has expired and they have vacated the unit. You must also include any accrued interest when returning the security deposit.
If you have made some deductions, you must provide the resident with an itemized statement as well, as clear communication at this stage helps maintain positive landlord-tenant relationships and reduces the risk of disputes.
Property Management and Security Deposit Compliance
Complying with North Dakota security deposit laws can be time-consuming and complex. Professional property management companies help landlords stay compliant by handling deposit collection, documentation, and returns.
While property management services involve fees, those fees generally cover operational tasks and legal compliance, helping landlords reduce risk and save time.
