Overview
North Carolina security deposit laws are governed by the Tenant Security Deposit Act (N.C.G.S. Article 6, §§ 42-50 through 42-56). North Carolina has specific deposit limits based on lease term length, requires trust account storage, and mandates detailed written notice to tenants about where their deposit is held. A security deposit compliance platform can help manage these varying requirements.
Maximum Security Deposit
North Carolina's deposit limits vary by lease term (N.C.G.S. § 42-51):
- Week-to-week tenancy: Maximum 2 weeks' rent
- Month-to-month tenancy: Maximum 1.5 months' rent
- Longer than month-to-month: Maximum 2 months' rent
Pet deposits: Allowed, but count toward the total maximum. Service animal deposits cannot be charged.
Note: These limits do not apply to landlords renting individual rooms.
Return Timeline
Under N.C.G.S. § 42-52, landlords must return the deposit within 30 days after termination of the tenancy and delivery of possession.
Standard Return: 30 Days
Mail or deliver the remaining balance with an itemized statement of deductions. (South Carolina has comparable rules—see South Carolina security deposit laws.)
Extended Timeline: Up to 60 Days
If the full extent of damages cannot be determined within 30 days, the landlord must:
- Provide an interim accounting within 30 days
- Provide a final accounting within 60 days
Unknown Address
If the tenant's forwarding address is unknown, the landlord must hold the balance for at least 6 months for collection.
Interest & Storage Requirements
North Carolina does not require interest payments on security deposits.
Trust Account Requirement (N.C.G.S. § 42-50)
- Deposits must be held in a trust account at a licensed, federally insured institution
- May be held out-of-state only if landlord provides an adequate bond
- Alternatively, landlord may furnish a bond from a licensed NC insurance company
Required Notice
Within 30 days of receiving the deposit, landlords must notify tenants in writing of:
- The name and address of the bank or institution
- Or the name of the insurance company providing the bond
Allowable Deductions
Under N.C.G.S. § 42-51, landlords may deduct for:
- Unpaid rent
- Damage caused by the tenant (not normal wear and tear)
- Cost of removal and storage of tenant's abandoned property
- Court costs related to eviction proceedings
Deductions cannot exceed actual damages, and landlords cannot withhold for normal wear and tear.
Penalties for Non-Compliance
Under N.C.G.S. § 42-55:
- Bad faith retention: Tenant may recover up to twice the amount wrongfully withheld
- Missing deadlines: Failure to return deposit or provide itemization may require full return
- Storage violations: Failure to properly store deposit or notify tenant may result in liability
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. Request a demo to see how Passive streamlines condition documentation.
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.