North Carolina Security Deposit
North Carolina Security Deposits

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A North Carolina security deposit is an amount paid by the tenant to the landlord at the beginning of a lease to cover expenses incurred by the landlord for which the tenant was responsible, but did not pay. Security deposits are governed by the 1977 Tenant Security Deposit Act (N.C. Gen. Stat. §§ 42-50 to 56). Under this Act, if the lease is month-to-month, the security deposit cannot exceed one and one half months' rent, and if the lease is longer than month-to-month, the security deposit is limited to two months' rent. (If the lease is week-to-week, the security deposit is limited to two weeks' rent.)

Landlord's Obligations During the Lease: The Act forbids the landlord from depositing the security deposit in his personal bank account. The landlord must establish a separate trust account in a North Carolina bank, and must inform the tenant of the name and address of that bank within thirty days of the beginning of the lease. In lieu of opening a trust account, the landlord may purchase a security deposit bond from a North Carolina insurance company. These requirements are designed to make it easier for the tenant to recover her security deposit at the end of the lease.

Landlord's Obligations at the End of the Lease: The landlord can retain part or all of the security deposit to cover only the following costs: (1) the tenant's failure to pay rent; (2) damage to the premises;

 (3) expenses related to the tenant's moving out before lease expires; (4) unpaid bills of the tenant which become a lien against the premises; (5) costs of re-renting the premises after a breach of the lease by the tenant; (6) costs of removing and storing the tenant's property after eviction; and (7) court costs in connection with terminating a tenancy.

RETURN OF DEPOSIT: The landlord must return the deposit within thirty days of the end of the lease. If the landlord keep any portion of the security deposit, for any of the reasons given above, the landlord must explain the charges to the tenant in writing. This is referred to as an accounting.

The landlord can only keep enough of the security deposit to cover his actual costs of repairs, unpaid bills, etc. For example, if the tenant paid a $600 deposit, and the landlord then paid a repair service $100 to replace a window that the tenant had broken and did not repair before moving out, the landlord can charge no more than $100 for that item on the accounting. If that is the only charge against the security deposit, the landlord must return $500. Any clause in the lease that gives the landlord the power to withhold more than her actual costs -- commonly called forfeiture clauses -- is not enforceable. Conversely, if the actual costs incurred by the landlord exceed the amount of the security deposit, the landlord can keep the entire deposit and sue the tenant for the difference. Landlords should see our Tenant Screening Service and Guides.

Normal Wear and Tear and Damage: The landlord can use the security deposit to repair damage for which the tenant is responsible. But the landlord cannot apply the security deposit to normal wear and tear. The question is: What's the difference?

Normal wear and tear includes deterioration of the premises that occurs under normal use conditions. For example, paint may fade, electrical switches may wear out and break, pull strings on curtains may fray and snap, and carpet may wear down. These things happen even if the tenant cleans regularly and cares for the premises reasonably. Damage occurs from unreasonable use or accidents, and includes extreme build up of dirt, mold, etc., stains on carpets, and broken windows. 

The tenant can take steps to avoid disputes over damage. At the beginning of the lease term, the tenant should inspect the premises thoroughly and note all problems in writing. The tenant should sign and date the list and also have the landlord sign the list. At the end of the lease, the tenant should again inspect the premises with the landlord present, discuss any damage with the landlord, and against prepare a list. For more on Normal Wear and Tear See for their Normal Wear and Tear Guide

Small Claims Court: If the tenant believes that the landlord has unlawfully withheld an excessive amount of the security deposit, and the parties cannot resolve the dispute between themselves, small claims court is an option. If the landlord deliberately withheld more than his lawful share of the security deposit, or deliberately withheld the deposit past the thirty-day period, the court may award the tenant the cost of her attorney's fees, in addition to any other damages. If you need a North Carolina Lawyer, you can find with our Lawyer Search Engine

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