Overview
Minnesota security deposit laws are governed by Minnesota Statutes § 504B.178. Minnesota is one of the few states that requires landlords to pay interest on security deposits. The state also has a relatively short 21-day return deadline and requires landlords to provide tenants with a copy of the statute when returning deposits. A security deposit management software helps automate interest calculations and deadline tracking.
Maximum Security Deposit
Minnesota state law does not impose a specific limit on security deposit amounts. However, deposits must be reasonable and customary for the area.
Minneapolis Exception
Minneapolis has stricter local limits:
- Security deposits cannot exceed one month's rent
- If a landlord requires more than one month's rent upfront (e.g., first + last month), the security deposit cannot exceed half of one month's rent
In practice, most Minnesota landlords charge one to two months' rent.
Return Timeline
Under § 504B.178, landlords must return the security deposit within 21 days after:
- The tenant moves out, AND
- The tenant provides a forwarding address
The 21-day period starts after the tenant has fully vacated and returned the keys. (Wisconsin has similar rules—see Wisconsin security deposit laws.)
Condemnation Exception
If the lease ends because of condemnation, the landlord must return the deposit within 5 days after the tenant vacates.
Required Documentation
When returning a deposit, landlords must include:
- A written statement listing any damages or charges being deducted
- A copy of Minnesota Statutes § 504B.178
- In Minneapolis: a copy of Minneapolis Code of Ordinances 244.2040
Interest Requirements
Minnesota requires landlords to pay interest on security deposits.
Interest Rate
- Minimum rate: 1% simple interest per year
- Interest is not compounded
- Landlords are not required to pay interest if the total accrued amount at the end of the lease is less than $1
Interest Calculation
- Interest begins accruing on the first day of the month following full payment of the deposit
- Accrual ends on the earlier of:
- The last day of the month the landlord returns the deposit, OR
- The date of any court judgment for the deposit
Allowable Deductions
Landlords may deduct from the security deposit for:
- Unpaid rent
- Damages beyond ordinary wear and tear
- Lease violations
Important: Landlords cannot charge a cleaning fee unless the cleaning is needed for problems or damage beyond "ordinary wear and tear."
Penalties for Non-Compliance
Minnesota has strong penalties for violations:
Bad Faith Retention
If a landlord withholds a deposit in bad faith or fails to return it within the required period:
- Tenant may recover up to twice the amount wrongfully withheld
- Plus accrued interest
Punitive Damages
Bad faith retention may also subject the landlord to punitive damages up to $500 for each deposit, in addition to actual damages.
Common Compliance Questions
What counts as "normal wear and tear"?
Normal wear and tear includes minor scuffs on walls, slightly worn carpet in high-traffic areas, small nail holes from hanging pictures, and faded paint from sunlight. It does not include large holes in walls, stained or burned carpet, broken fixtures, or damage from pets. When in doubt, document the condition at move-in with dated photos.
How should I document the unit's condition?
Complete a detailed move-in checklist with the tenant, noting existing damage, appliance conditions, and overall cleanliness. Take timestamped photos or video of every room. At move-out, repeat the process. This documentation protects both parties and makes deduction decisions defensible if disputed. Schedule a demo to learn how Passive automates this workflow.
Can I deduct for unpaid utility bills?
Only if your lease specifically allows it and the utilities are in your name. If utilities are in the tenant's name, contact the utility company directly—they have their own collection processes. Never make unauthorized deductions, even for amounts you believe the tenant owes.