Security deposits in Minnesota are regulated by Minnesota Statutes, Chapter 504B. Certain municipalities may have local laws that supplement state regulations. To ensure full compliance, verify the regulations applicable in your area.

Maximum Security Deposit

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

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Holding & Interest Requirements

Holding Requirements: Minnesota state law does not currently require security deposits to be held within the state, in separate accounts, or in interest-bearing accounts. 

Interest on Deposits: Landlords/property managers must pay simple interest on the security deposit at a rate of 1% per annum, computed from the first day of the month following the tenant's payment of the security deposit until the last day of the month in which the landlord/property manager returns the security deposit to the tenant.

Information Provided to Tenant: At the beginning of the tenancy, or within 14 days after the tenant moves in, the landlord/property manager must notify the tenant of their option to request an initial inspection of the rental unit. If the tenant requests an inspection, the landlord/property manager and the tenant must agree on a mutually acceptable date and time.

Deposit Refunds

Timeline: Within 3 weeks of the tenant vacating the rental unit and receipt of the tenant’s forwarding address, the landlord/property manager must either (1) return the full security deposit and interest, or (2) provide a written statement of deductions to the deposit together with the portion of the deposit and interest being returned. 

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

• Unpaid rent
• Damages beyond normal wear and tear
• Other unpaid funds under the lease

Prior to the end of the tenancy, the landlord/property manager must notify the tenant in writing of their option to request a move-out inspection within 5 days of the end of the lease and of the tenant's right to be present during the inspection. The purpose of the inspection is to allow the tenant an opportunity to remedy identified deficiencies and avoid deductions from the security deposit. If the tenant does not request a move-out inspection, the landlord/property manager's duties regarding the inspection are discharged. 

Documentation of Deductions: The written statement of deductions provided to the tenant must list the specific reasons for making deductions from the security deposit

‍Penalties for Violations: Failure to return the deposit and interest or provide the written statement of deductions as required may result in the landlord/property manager being liable for up to 2x the amount wrongfully withheld, plus 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 must: (1) transfer the security deposit and interest to the new owner and provide written notice to the tenant of the new owner’s name and address, or (2) return the security deposit and interest (after making any lawful deductions) to the tenant.