Security deposits in North Carolina are regulated by North Carolina General Statutes § 42-38 to § 42-56. Certain municipalities may have local laws that supplement state regulations. To ensure full compliance, verify the regulations applicable in your area.

KEY POINTS AT A GLANCE: North Carolina

Deposit Cap: Varies – Dependent on Lease Length

Holding Requirements: Yes

Interest Required: No

Return Window: 30 days

COLLECTION & HOLDING REQUIREMENTS

Deposit Cap: For month-to-month leases, landlords/property managers cannot collect a security deposit greater than one and a half months’ rent. For leases that are not month-to-month, landlords/property managers may collect up to two months’ rent.

Holding Requirements: North Carolina state law requires security deposits to be held in a trust account with a licensed and federally insured depository institution located in North Carolina. As an alternative to holding the deposit in a trust account, landlords/property managers may purchase a bond from an insurance company licensed to do business in the North Carolina.

Information Provided to Tenant: Within 30 days after the lease begins, landlords/property managers must notify the tenant of the name and address of the bank/institution where the security deposit is held or the name of the insurance company providing the bond.

‍Interest on Deposits: North Carolina state law does not currently require landlords/property managers to pay tenants interest on security deposits.

RETURN

Timeline: Within 30 days after the tenant vacates the property, the landlord/property manager must either (1) return the full security deposit, or (2) provide the tenant with an itemized list of any deductions to the security deposit together with the portion of the security deposit being returned, to the tenant’s last known address. If the tenant’s address is unknown, the landlord/property manager must hold the deposit, or the balance thereof after applying deductions, for collection by the tenant for at least six months.

Documentation of Deductions: The itemized list of deductions to the security deposit must specify each deduction made. If the extent of deductions cannot be determined within 30 days after the tenant vacates the rental unit, the landlord/property manager must provide the tenant with an interim accounting within 30 days of vacancy and provide a final accounting within 60 days of vacancy.

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

• Unpaid rent or late fees
• Unpaid utilities
• Unpaid bills that become a lien against the property due to the tenant’s occupancy
• Damages beyond normal wear and tear
• Other lawful charges due under the lease
• Costs of removal and storage of the tenant’s personal property after a summary ejectment proceeding

‍Penalties: Failure to return the security deposit or provide the itemized list of deductions as required by North Carolina state law may result in the landlord/property manager being liable for the full amount of the security deposit, plus attorney’s fees and court costs if the tenant wins in a lawsuit.

SALE OF THE RENTAL PROPERTY

Within 30 days of selling the rental property, the landlord/property manager must: (1) transfer the security deposit to the new owner (after making any lawful deductions) and notify the tenant by mail of the transfer, including the name and address of the new owner; or (2) return the security deposit to the tenant (after making any lawful deductions).