New Hampshire Security Deposit Laws in 2025

Overview of New Hampshire Security Deposit Law

When I first started working with landlords at Hemlane which is a property management platform that helps streamline everything from tenant screening to rent collection, one of the most common questions I would get was about security deposits. Specifically, "What am I actually allowed to do with this money?" It us a deceptively simple question with some surprisingly complex answers, especially in New Hampshire, where the rules are stricter than many landlords realize.

Security deposit disputes are one of the leading causes of conflicts between tenants and landlords. According to 603 Legal Aid, New Hampshire's free legal services organization, improper handling of security deposits is among the most common violations they see. The good news is most of these problems are completely avoidable when you understand the rules.

What New Hampshire Law Actually Says About Security Deposits

New Hampshire's security deposit regulations are outlined in RSA 540-A, the state's Prohibited Practices and Security Deposits statute. This law does not just suggest best practices but it creates legally binding requirements with real penalties for violations.

This is what surprised me most when I first dug into this statute: the New Hampshire Law Library notes that violations of security deposit rules constitute violations of the Consumer Protection Act. That means landlords who mess this up are not just dealing with an unhappy tenant but they are potentially facing statutory penalties of up to twice the deposit amount plus interest.

Who is Actually Covered?

Not every rental in New Hampshire falls under RSA 540-A. According to RSA 540-A:5, the law specifically excludes owner occupied buildings with five or fewer units. So if you live in your duplex and rent out the other unit then these rules do not apply to youalthough you are still ethically obligated to handle deposits fairly and return them appropriately.

For everyone else managing apartments, condos or non-owner-occupied properties, RSA 540-A is the law you need to know inside and out.

How Much Can You Actually Charge?

New Hampshire caps security deposits at one month's rent or $100, whichever is greater, according to RSA 540-A:6. If your monthly rent is $1,200 you can charge up to $1,200 as a security deposit. If you are renting a room for $600 monthly then you can still charge the $100 minimum.

But this is where landlords sometimes get tripped up- this cap includes everything. Pet deposits, cleaning deposits and damage deposits all count toward that one-month maximum. You cannot charge a $1,200 security deposit plus an additional $300 pet deposit. The total cannot exceed one month's rent.

The Single-Family Home Exception

There is one major carve out. Single-family home rentals are exempt from deposit limits entirely. If you are renting out an entire house, not a condo or townhouse in a multi-unit buildingbut an actual detached single-family home, you can charge any security deposit amount. This exception exists because New Hampshire lawmakers recognized that single-family rentals typically involve smaller-scale landlords with different risk profiles.

However, even though you can charge more, I would advise caution. Charging a $5,000 security deposit on a $1,500 monthly rental might be legal but it is also going to significantly limit your tenant pool and could backfire if you end up in small claims court trying to justify keeping excessive amounts.

Where That Money Actually Goes (And Why It Matters)

One of the most misunderstood aspects of New Hampshire security deposit law is the trust requirement. According to RSA 540-A:6(II)(a) states security deposits continue to be the money of the tenant and shall be held in trust.

Read that again: the deposit is still the tenant's money. You are holding it in trust and not receiving it as income.

This means you must:

1. Keep deposits in a separate account at a New Hampshire bank, savings and loan or credit union
2. Never commingle deposits with your personal funds. This is called "commingling," and it is a violation.
3. Pay interest to the tenant at a rate equal to what the account earns

The New Hampshire Supreme Court has ruled that failing to properly segregate security deposits is a serious violation. In the case Zorn v. Demetri, the court found a landlord liable for violations including failure to hold deposits in trust and commingling funds with personal money.

The Interest Requirement You Can't Ignore

If you hold a security deposit for one year or longer you must pay the tenant interest on it annually. The interest rate must match what the account actually earns. You cannot just pick an arbitrary low rate. According to 603 Legal Aid, tenants can request interest accrued on their deposit every three years and 30 days before their tenancy anniversary.

This a practical example: If you are holding a $1,500 deposit in an account earning 2% annually, that is $30 per year you owe the tenant in interest. It might not sound like much but forgetting to pay it for three years means you owe $90 plus potential penalties if the tenant pursues it.

The Receipt Requirement That Protects Everyone

Within 30 days of receiving a security deposit landlords must provide tenants with a written receipt that includes the following

• The deposit amount
• The name and address of the bank where it's held
• The account number
• The current interest rate

Per RSA 540-A:6(I)(b), this receipt must also notify the tenant that they have five days to provide a written list of any existing defects or damages in the unit.

There's one exception: If the tenant pays by personal check, bank check or government/nonprofit voucher, no formal receipt is required. However, you must still notify them about the five-day defect documentation period.

Why does this matter? Because that initial five-day window is when tenants document pre-existing conditions. If a tenant submits a list noting stained carpet, cracked tile or scratched countertops within those five days you cannot later deduct for those issues when they move out.

What You Can Actually Deduct (And What You Can't)

When a tenancy ends, landlords can make deductions for specific reasons outlined in RSA 540-A:7:

Allowed Deductions:

• Unpaid rent, including if the tenant breaks the lease early and you cannot re-rent immediately.
• Damages beyond normal wear and tear
• Necessary cleaning if the unit is left unreasonably dirty
• Unpaid utilities or other charges specified in the lease
• Share of real estate tax increases if the lease requires a tenant contribution

Not Allowed:

• Normal wear and tear like faded paint and worn carpet from regular use
• Pre-existing damage (anything noted during move-in inspection)
• Repairs needed due to landlord negligence or old age
• Expenses to prepare the unit for the next tenant beyond restoring it to its original condition

The New Hampshire Law Library emphasizes that distinguishing between "damage" and "normal wear and tear" depends on all the facts. Generally crayon marks, holes in walls and broken appliances due to misuse are damage. Worn carpeting, faded paint after several years and minor scuffs are normal wear and tear.

The Inspection Process That Prevents Disputes

Smart landlords conduct two inspections - one when the tenant moves in, and one when they move out. While New Hampshire law does not explicitly mandate these inspections the way some states do 603 Legal Aid strongly recommends them as crucial documentation for both parties.

Move-in inspection: Walk through with the tenant before they have moved any furniture in. Document everything with photos and written notes. Both parties should sign the inspection report. This becomes your baseline.

Move-out inspection: After the tenant has removed all belongings and cleaned do a walk through again. Compare the current condition to your move-in documentation. Note any new damage beyond normal wear and tear.

At Hemlane, we have seen firsthand how proper documentation prevents disputes. When landlords can show clear before and after photos with dated inspection reports, small claims courts almost always rule in their favor if deductions were reasonable.

The 30-Day Return Deadline (And What Happens If You Miss It)

New Hampshire gives landlords 30 days from the end of the tenancy to either return the full deposit with interest or return the remaining balance with an itemized list of deductions.

According to RSA 540-A:7, if you are making any deductions, you must provide:

• A written, itemized list of damages
• The specific nature of repairs needed
• Evidence that repairs have been or will be completed (receipts, invoices and estimates)

The clock starts when the tenant vacates and returns possession meaning they have moved out, returned keys and no longer have access to the property. The New Hampshire Department of Justice advises landlords to send this by certified mail with a return receipt for proof of delivery.

What If You Miss the Deadline?

Missing the 30-day deadline is expensive. Landlords who fail to comply with return requirements can be liable for up to twice the security deposit amount plus interest according to the New Hampshire Law Library's interpretation of RSA 540-A:8.

There is only one exception, which is if the tenant did not provide a forwarding address and you made reasonable efforts to locate them the delay may be excused. "Reasonable efforts" means sending letters to last known addresses, checking references from the rental application and documenting everything.

When Tenants Disappear: The Unclaimed Deposit Rule

If a tenant moves out without providing a forwarding address and you genuinely cannot locate them after making good faith efforts the deposit does not become yours to keep. According to RSA 540-A:6 unclaimed deposits must be turned over to the state after five years.

The tenant can then recover their deposit by filing a claim with the New Hampshire State Treasurer's office. This protects tenants while acknowledging that landlords can't hold funds indefinitely for someone they cannot find.

How to Handle Disputes: Your Small Claims Court Options

When landlords and tenants cannot resolve security deposit disagreements most cases end up in small claims court. New Hampshire's District Division of Circuit Court handles disputes up to $10,000.

According to RSA Chapter 503, the small claims process is designed to be simple, speedy and informal. Neither party needs an attorney though both can hire one if they choose.

Key small claims details for security deposit cases:

• Filing fee ranges from $90-$145, depending on claim amount
• Electronic filing is mandatory through TurboCourt for self-represented or File & Serve with attorneys
• Claims over $5,000 require mandatory mediation
• Cases typically resolve within 60 to 90 days from filing
• The statute of limitations is three years for security deposit claims

603 Legal Aid notes that having proper documentation move-in or move-out inspections, receipts, photos, a lease agreement and the required 30-day itemized statement dramatically improves your chances of success.

The Penalties That Make Compliance Worth It

New Hampshire doesn't mess around with security deposit violations. According to RSA 540-A:8 landlords who violate deposit handling requirements are deemed to have violated the Consumer Protection Act (RSA 358-A).

This means potential consequences include:

• Up to twice the security deposit amount in damages
• Interest on the deposit
• Court costs and reasonable attorney's fees
• Additional penalties if violation was willful or knowing (up to three times damages)

The New Hampshire Supreme Court has ruled in multiple cases that even minor procedural violations can result in these penalties, though courts may excuse minor deviations if there's "substantial compliance" and the tenant received all required information.

Real-World Application: What This Looks Like at Hemlane

At Hemlane, we manage properties across New Hampshire and have developed systems to ensure compliance with RSA 540-A. Here's what proper security deposit handling looks like in practice:

At lease signing:

• Collect deposit check
• Open separate escrow account at NH bank
• Generate and send receipt within 5 days with all required information
• Provide tenant with move-in inspection form and remind them of 5-day documentation window

During tenancy:

• Track interest annually
• Pay interest to tenant or credit toward rent if requested
• Maintain clear records of deposit location and account details
• Never touch the money for operating expenses

At move-out:

• Schedule final walkthrough
• Complete detailed inspection with photos
• Calculate any legitimate deductions
• Within 20 days (we build in buffer before 30-day deadline), mail itemized statement with receipts and remaining deposit
• Send via certified mail, keep proof of delivery

This systematic approach has virtually eliminated deposit disputes for the landlords we work with. When everyone knows the rules and follows them there is simply less room for disagreement.

Special Considerations and Edge Cases

Can You Charge First, Last, and Security?

Technically yes, but with limits. According to 603 Legal Aid, landlords can require first month's rent, last month's rent, AND a security deposit—but the security deposit still cannot exceed one month's rent. So if monthly rent is $1,000, you could collect $3,000 total ($1,000 first, $1,000 last, $1,000 security), but this may be considered excessive and could violate the law depending on interpretation.

What About Pet Deposits?

Pet deposits count toward the one-month security deposit cap. You cannot charge a $1,200 security deposit plus a separate $300 pet deposit if monthly rent is $1,200—the combined total would exceed the legal maximum.

Some landlords work around this by charging non-refundable pet fees (clearly labeled as such in the lease), though there's legal ambiguity about whether these still count toward the cap. The safest approach is to assume everything counts.

When Property Changes Hands

If you sell your rental property or it goes into foreclosure, RSA 540-A:6(III) requires you to transfer security deposits to the new owner within five days and notify tenants by registered or certified mail. The new owner then becomes responsible for returning deposits at lease end.

This transfer requirement protects tenants from losing their deposits when properties change ownership.

Bottom Line: Compliance Is Easier Than Litigation

Security deposit laws in New Hampshire exist to protect both landlords and tenants. For landlords, they provide clear guidelines on what you can charge, how to handle deposits, and what deductions are legitimate. For tenants, they ensure their money is safe and properly returned.

The penalties for violations are severe enough that it's simply not worth cutting corners. Between the potential for double damages, court costs, and attorney's fees, a landlord who improperly withholds a $1,500 deposit could end up owing $5,000 or more after litigation.

From my experience at Hemlane working with hundreds of New Hampshire landlords, the ones who succeed long-term are those who treat security deposit compliance as non-negotiable. They:

• Keep meticulous records from day one
• Segregate deposits in proper accounts
• Document everything with photos and written reports
• Communicate clearly with tenants about deductions
• Return deposits promptly with proper itemization

When you handle security deposits correctly, you're not just following the law—you're building trust with tenants, reducing turnover, and protecting yourself from costly disputes.

Additional Resources

For landlords and tenants seeking more information:

• 603 Legal Aid - Free legal assistance for low-income tenants, comprehensive guides on tenant rights
• New Hampshire Law Library - Legal research resources, case law, and statute interpretations
• NH Circuit Court - Small Claims - Filing procedures, forms, and electronic filing information
• NH Department of Justice - Consumer Protection - Small claims court guidance and consumer rights
• Full text of RSA 540-A - Complete statute with all sections

Understanding these laws isn't just about avoiding penalties—it's about running a professional, ethical rental business that respects both your financial interests and your tenants' rights.

Disclaimer: This article provides general information about New Hampshire security deposit laws and should not be considered legal advice. Landlord-tenant laws can be complex and fact-specific. For advice about your particular situation, consult with a qualified attorney licensed in New Hampshire.