Security deposits in Iowa are regulated by Iowa Code Annotated, Title 14, Chapter 562A. Certain municipalities may have local laws that supplement state regulations. To ensure full compliance, verify the regulations applicable in your area.

Maximum Security Deposit

Security deposits are limited to two months’ rent.

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Holding & Interest Requirements

Holding Requirements: The security deposit must be held in a bank, savings and loan association, or credit union that is federally insured, and cannot be commingled with the landlord’s personal funds.

‍Interest on Deposits: Iowa state law does not currently require landlords to pay interest on security deposits for the first 5 years of the tenancy. After 5 years, interest must be paid to the tenant.

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

Deposit Refunds

Timeline: Within 30 days after the tenant vacates the property and provides the landlord/property manager with a mailing address or delivery instructions, the landlord/property manager must either (1) return the full security deposit, or (2) provide the tenant with a written statement of deductions to the security deposit together with the portion of the security deposit being returned. If the landlord/property manager fails to deliver possession of the premises at the beginning of the tenancy, unlawfully removes the tenant, or willfully diminishes services to the tenant (e.g., stops, interrupts, or reduces electricity, gas, or water to the premises), and the tenant terminates the tenancy as a result, the landlord/property manager must return the full security deposit. If the tenant does not provide a forwarding address or delivery instructions for 1 year after the lease ends, the security deposit reverts to the landlord/property manager, and the tenant is deemed to have forfeited all rights to the security deposit.

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

• Unpaid rent or other funds due to the landlord/property manager under the lease
• Damages beyond normal wear and tear, including cleaning costs to restore the unit to its condition at the start of the tenancy.
• Expenses incurred in acquiring possession of the premises from a tenant who breaches the lease and fails to vacate the premises after receiving notice from the landlord/property manager 

Documentation of Deductions: The written statement of deductions delivered to the tenant must identify the specific reasons for retaining the security deposit and the specific nature of any damages.

Penalties for Violations: Failure to return the deposit or provide a written statement of deductions as required may result in the landlord/property manager being liable for the full security deposit, 2x monthly rent, actual damages, and reasonable 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/property manager must either (1) transfer the security deposit (or any remainder after making lawful deductions) to the new owner and provide notice to the tenant of the new owner’s name and address, along with a stamped envelope addressed to the new owner, or (2) return the security deposit to the tenant (after making any lawful deductions). In completing either of the above options, the landlord is relieved of further liability concerning the security deposit, and the new owner assumes responsibility. If the landlord/property manager makes any deductions from the security deposit, they must provide the tenant with an itemized statement of deductions.