Security deposits in the state of Indiana are regulated by Indiana Code 32-31-3. Certain municipalities may have local laws that supplement state regulations. To ensure full compliance, verify the regulations applicable in your area.

Maximum Security Deposit

Indiana state law does not currently have a limit on the amount that landlords/property managers can require as a security deposit.

Holding & Interest Requirements

Holding Requirements: Indiana state law does not currently specify where landlords/property managers must hold security deposits. 

Information Provided to Tenant: There is currently no specific requirement for landlords/property managers to provide tenants with information about where their security deposit is held. 

Interest on Deposits: Indiana state law does not currently require landlords to pay tenants interest on security deposits.

Deposit Refunds

‍Timeline: Within 45 days after the tenant vacates the property, the landlord/property manager must either (1) return the full security deposit (by check or money order), or (2) provide the tenant with a written notice itemizing deductions to the security deposit together with the portion of the security deposit being returned. The landlord/property manager is not required to return the security deposit or provide a written notice of deductions until the tenant provides a forwarding address in writing. 

Permissible Deductions: Landlords/property managers may deduct the following from a security deposit:

• Unpaid rent
• Damages beyond normal wear and tear
• Damages that the landlord has suffered by reason of the tenant’s noncompliance with applicable law or the lease
• Unpaid utility or sewer charges that the tenant is obligated to pay under the lease

Documentation of Deductions: The written notice of deductions to the security deposit must include an itemized list of damages, the estimated cost of repair for each damaged item, the total amount of deductions, and the lease upon which the deductions are based.

‍Penalties for Violations: Failure to return the security deposit or provide a written notice of itemized deductions as required may result in the landlord/property manager being liable for the portion of the security deposit that is wrongfully withheld, plus attorney’s fees and court costs if the tenant wins in a lawsuit.

Sale of the Rental Property

If the property is sold, the landlord must give the tenant written notice of the sale and remains liable for the security deposit for 1 year unless (1) the new owner assumes liability by giving notice to the tenant, and (2) the landlord transfers the security deposit to the new owner.