Security deposits in Tennessee are regulated by Tennessee Code § 66-28-101 to § 66-28-501. 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: Tennessee

Deposit Cap: No

Holding Requirements: Yes

Interest Required: No

Return Window: No

COLLECTION & HOLDING REQUIREMENTS

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

Holding Requirements: Security deposits must be held in an account used only for that purpose in a bank or other lending institution regulated by the state of Tennessee or the U.S. federal government.

Information Provided to Tenant: Landlords/property managers must notify tenants of the address of the bank or other lending institution in which the security deposit is held.

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

RETURN

Joint Inspection: Upon the landlord/property manager’s request that the tenant vacate the rental unit or within 5 days of the tenant providing a notice of vacancy, the landlord/property manager must provide the tenant with a notice of joint inspection to assess the rental property for damages. Following this inspection, the landlord/property manager must prepare a written list of identified damages that includes the estimated cost of repair for each item. The landlord/property manager must then return the security deposit (after making any lawful deductions) to the tenant and provide them with a copy of the written list of damages. If the tenant contests any item on the list, they must state their disagreement in writing. The tenant may then bring a lawsuit against the landlord/property manager to recover any portion of the security deposit retained that is associated with disputed items. 

The tenant does not have a right to a joint inspection of the rental unit if they: (1) vacate the property without giving notice; (2) abandon the premises; (3) are judicially removed; (4) do not contact the landlord/property manager after receiving the notice of joint inspection; (5) fail to appear at the arranged time of the inspection; (6) do not request a joint inspection, or (7) are otherwise inaccessible to the landlord/property manager. Under any of these circumstances, the landlord/property manager may inspect the premises on their own and compile a written list of damages and repair costs, provided that they send a copy of the written list by certified mail to the tenant upon request.

Timeline: If the tenant is due any refund of the security deposit, the landlord/property manager must send the written notice of damages to the tenant’s last known or reasonably determinable address, together with the portion of the security deposit being returned. If the landlord/property manager does not receive a response from the tenant within 60 days of notice, they may retain the remainder of the security deposit.

Documentation of Deductions: The written list prepared by the landlord/property manager must specify the ascertainable damages and the estimated cost of repair.

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

• Unpaid rent
• Damages beyond normal wear and tear, but only if discovered before the earlier of (1) 30 days after the tenant vacates or abandons the premises, or (2) 7 days after a new tenant takes possession of the rental unit.
• Other charges or damages to which the landlord is entitled under the lease

Penalties: Failure to return the security deposit or provide the written list of damages to the tenant as required by Tennessee 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

If the property is sold, the landlord/property manager must provide written notice to the tenant and transfer the security deposit to the new owner.