North Dakota Security Deposit Laws in 2025

By the Hemlane Team

I havve been managing rental properties in North Dakota for over a decade now and if there is one thing that has caused me more headaches than anything else and it is security deposits. Not because the laws are complicated, they are actually pretty reasonable, but because so many landlords, myself included, early on, do not really understand them.

Last year, I watched a colleague lose a small claims case over a $900 deposit. She thought she was in the right. The judge did not agree. Why? She missed the 30-day deadline by four days. That mistake cost her $2,700 plus attorney fees. Ouch.

So let us break down exactly how security deposits work in North Dakota. No legal jargon. Just the things you actually need to know.

What Exactly Is a Security Deposit?

Pretty simple concept, really. Your tenant hands you money upfront—usually around a month's rent—and you hold onto it during their lease. It's insurance. If they trash the place, skip out on rent, or leave the apartment looking like a crime scene, you've got funds to cover the damage.

But here's what trips people up: that money isn't yours. It belongs to your tenant the entire time. You're just babysitting it. When their lease ends and everything's square, you give it back. All of it.

The deposit covers four main things:

• Property damage (not regular wear and tear—we'll get to that)
• Unpaid rent or utilities
• Cleaning costs if they leave the place a disaster
• Other lease violations

According to North Dakota Century Code § 47-16-07.1, these are your only legitimate reasons for keeping any portion of the deposit. Everything else? You're legally obligated to return it.

How Much Can You Actually Charge?

This surprises people. North Dakota doesn't have a hard cap on security deposits like some states do. California limits it to two months' rent. New York says one month. North Dakota? The law's a bit different.

Here's what the North Dakota Attorney General's office says: standard deposits can be up to one month's rent. That's for regular tenants with clean backgrounds.

Now, there's an exception. If someone has a felony conviction specifically related to security deposits—or if they've got documented history of really serious lease violations—you can charge up to two months' rent. But honestly? I've never actually used this provision. Most landlords haven't.

The reality is market-driven anyway. I've got a duplex in Fargo where I charge $1,100 for a $1,200/month unit. My rental in Grand Forks? I only ask for $800 on a $950 unit because the market's more competitive there. You charge too much, and good tenants go elsewhere. Simple as that.

Through Hemlane's platform, we've tracked this across hundreds of properties. Landlords who keep deposits reasonable (75-100% of monthly rent) fill their units about three weeks faster than those who ask for bigger amounts. Tenants have options, and they use them.

Pet Deposits Are Different

If you allow pets and I usually do, because pet owners are often fantastic tenants, you can charge an additional pet deposit in North Dakota.

The law allows up to $2,500 or two months' rent, whichever is greater (NDCC § 47-16-07.1). That's substantial. But charging the maximum rarely makes sense.

I typically charge:

• $200-$300 for cats
• $400-$600 for dogs under 50 pounds
• $600-$800 for larger dogs

Why the range? Bigger animals mean bigger potential damage. It's also about what the local market will bear. In Bismarck, I can get away with higher pet deposits than in smaller towns.

One critical thing: service animals aren't pets under the Fair Housing Act. You cannot charge a pet deposit for a legitimate service animal. Can't do it. Federal law trumps state law here. You can still hold tenants accountable for any damage the animal causes, but no upfront pet deposit.

Emotional support animals occupy a gray area. I usually consult with an attorney when these situations come up because the rules keep evolving.

Where You Store the Money Actually Matters

This is where landlords mess up constantly. You can't just throw security deposits into your regular checking account. North Dakota law requires deposits to go into a federally insured interest-bearing account (NDCC § 47-16-07.1(1)).

Separate account. Not mixed with your money. Period.

Why? Because if the tenant stays nine months or longer, that deposit needs to earn interest. You're required to pay them that interest when they move out. The rate ties to the Federal Reserve's discount rate each January 1st.

I've got a savings account at a local credit union just for security deposits. It's called "ND Property Deposits - Johnson." Nothing fancy. Earns about 0.5% annually right now. Not much, but it's what the law requires.

For leases under nine months, you don't have to worry about interest. But most residential leases run a year, so plan accordingly. Track it. Calculate it. Pay it.

Can Tenants Use Deposits for Last Month's Rent?

Short answer: no.

Longer answer: not unless you agreed to it in writing when the lease started.

I get this question every single year. Tenant's moving out. They call and say, "Just use my deposit for this month's rent." Sounds reasonable, right? It's not how it works.

The deposit isn't rent. It's for damages and lease violations. North Dakota law is clear about this. If your lease doesn't have a clause allowing it (and most don't), you're legally entitled to collect that final month's rent separately.

When I first started out, I let a tenant do this. Seemed like no big deal. Then I discovered she'd punched a hole in the bathroom door and left the carpet stained. I had no deposit to cover repairs because I'd already applied it to rent. Cost me about $800 out of pocket.

Lesson learned. Rent is rent. Deposits are deposits. Keep them separate.

Hemlane's lease templates include language that specifically addresses this scenario. Saves everyone confusion down the line.

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

This is where probably 80% of disputes happen. Landlords think they can charge for anything. Tenants think deposits should always come back in full. The truth lives somewhere in the middle.

North Dakota law allows three types of deductions:

Damage Beyond Normal Wear and Tear

Key phrase: "beyond normal wear and tear."

You can deduct for actual damage. Broken windows. Holes punched in walls. Carpet destroyed by pets. Countertops burned or stained. According to iPropertyManagement, these are legitimate deductions.

What you cannot deduct for:

• Small nail holes from hanging pictures
• Paint that's faded from sunlight
• Carpet that's worn down in walkways
• Minor scuffs on walls or floors
• Loose door handles or worn cabinet hardware

I had a landlord friend try to charge $400 to repaint an entire bedroom because of a few scuff marks. The tenant took her to small claims court. Judge ruled in the tenant's favor immediately. Those scuffs were normal wear and tear—expected after someone lives somewhere for a year.

The American Apartment Owners Association guidelines are helpful here. When in doubt, ask yourself: would this damage have happened anyway through regular living? If yes, you probably can't charge for it.

Unpaid Rent

This one's straightforward. Tenant owes you money? You can take it from the deposit. No permission needed. It's explicitly allowed under state law.

I had a tenant disappear halfway through the lease once. Just vanished. Owed me two months' rent. I used the deposit to cover it, then filed in small claims for the rest. Won the judgment, though collecting was another story entirely.

Cleaning Costs

You can charge for cleaning if—and this is important—the tenant left the place substantially dirtier than when they moved in.

"Substantially" is the key word. You can't charge for routine turnover cleaning. If you'd normally vacuum, mop, and wipe down surfaces between tenants anyway, that's your cost of doing business.

What you can charge for:

• Professional carpet cleaning for stains and odors
• Deep cleaning of an oven caked with grease
• Removing trash or belongings left behind
• Cleaning up after infestations caused by tenant behavior

Get receipts. Always. If you hire Stanley Steemer to clean the carpets, keep that invoice. If you do it yourself, document your time and materials. North Dakota courts expect reasonable, documented expenses.

I once had a tenant leave a refrigerator full of rotting food. I'm talking weeks-old mystery substances. Professional cleaning company charged $180 to deal with it. I deducted it from the deposit with photos and receipts. No dispute.

The 30-Day Deadline Is Serious Business

Pay attention here. This is where landlords get absolutely hammered.

Under NDCC § 47-16-07.1(3), you have exactly 30 calendar days from when the tenant moves out to either:

1. Return their full deposit plus interest, OR
2. Send them an itemized statement of deductions with the remaining balance

Thirty days. Not business days. Calendar days. Including weekends and holidays.

Tenant moves out July 15th? Your deadline is August 14th. Miss it by even one day, and you're in trouble.

How much trouble? North Dakota allows tenants to sue for triple damages plus attorney fees. That $1,200 deposit you held onto? Could cost you $3,600 or more.

I know a landlord in Minot who held a deposit for 35 days because he was waiting on contractor estimates for repairs. Tenant sued. Judge didn't care about the reason. Landlord missed the deadline. Ended up paying treble damages plus the tenant's legal fees—about $4,800 total over a $1,100 deposit.

The law doesn't care if you had good intentions. The deadline is the deadline.

I set calendar reminders for every single move-out. Hemlane's software does this automatically now, which has saved me more than once. Get the inspection done within a week. Get estimates immediately. Mail everything with time to spare.

Move-Out Inspections Aren't Required (But Do Them Anyway)

North Dakota doesn't legally require you to do a walk-through with your tenant present. According to TruHome Property Solutions, there's no statute mandating it.

Do it anyway. Seriously.

Here's why: when tenants see the damage firsthand, they're way less likely to dispute your deductions. I've done probably 200 move-out inspections over the years. Maybe 15 resulted in any kind of argument afterward. The rest? Smooth sailing.

My process:

• Schedule the walk-through for the tenant's last day
• Bring a printed checklist
• Take photos and videos with timestamps on my phone
• Point out any damage or issues as we go
• Get the tenant to sign off on the checklist

Takes maybe 45 minutes. Has prevented countless headaches.

Last year, I had a tenant absolutely convinced she'd left the place perfect. During the walk-through, I showed her the broken blinds in the bedroom and the cigarette burns on the deck railing (property was non-smoking). She'd genuinely forgotten about them. Agreed to the deductions on the spot. No dispute, no small claims court, no stress.

If a tenant refuses to do a walk-through, do one anyway and document everything. You're not required to have them there, but you need evidence of the property's condition.

When You Sell Your Property

Selling your rental? The security deposit obligations transfer automatically to the new owner under NDCC § 47-16-07.1(5).

This happened to me when I sold my first rental in 2019. Process goes like this:

1. You transfer the deposit (plus accrued interest) to the new owner
2. Either you or the new owner sends written notice to the tenant within 30 days
3. Notice identifies the new landlord and confirms the deposit transfer
4. New owner is now responsible for returning it when the lease ends

Make sure this is clearly documented in your purchase agreement. I've seen deals where this got fuzzy, and the tenant suffered for it. Get itemized lists of all deposits, interest amounts, and property conditions at transfer.

If you're buying rental property, verify those deposits exist before closing. I know someone who bought a fourplex where the previous owner had spent the deposits. New owner was still legally responsible for returning them. Cost him about $6,000 he didn't expect to pay.

Handling Disputes

Even when you do everything right, disputes happen. Tenants sometimes see things differently than you do.

Smart approach:

Before Anyone Moves In:

• Do a detailed move-in inspection with photos
• Have tenant sign off on the property condition
• Give them a copy of North Dakota's security deposit law (available from ND Attorney General)
• Explain your expectations for cleanliness and damage clearly

During the Lease:

• Conduct periodic inspections with proper notice
• Document problems as they happen
• Fix maintenance issues quickly (prevents tenant damage)
• Keep communication records in writing

When They Move Out:

• Offer that walk-through inspection
• Take extensive photos and video
• Be fair—don't nickel and dime over normal wear
• Send detailed itemized statements with receipts attached

If Things Go Sideways:

• Try to negotiate directly first
• Keep everything in writing (texts and emails count)
• If you can't resolve it, North Dakota's small claims court handles disputes up to $15,000
• Bring your documentation—photos, receipts, lease, inspection reports

Remember: the burden of proof is on you as the landlord. You're claiming tenant money. You need to prove why you're entitled to keep it.

Random Questions People Always Ask Me

What about application fees?
Separate from security deposits. You can charge reasonable application fees to cover background checks and credit reports. Just keep them reasonable—$30 to $50 is typical.

Tenant abandoned the property. Now what?
Still follow the 30-day rule. Send the itemized statement to their last known address. If it comes back undeliverable, you've made good faith effort. Keep documentation.

Can I charge to repaint the whole apartment?
Only if damage goes beyond normal wear. A few scuff marks? That's on you. An entire wall covered in crayon art or cigarette smoke damage? Deductible.

What about replacing carpet?
Tricky one. Carpets have useful lives—HUD guidelines say about 5-7 years. If your carpet was already 6 years old when tenant moved in, you can't charge full replacement cost two years later. Depreciate accordingly. If they destroyed brand new carpet, that's different.

Tenant wants to pay deposit in installments. Okay?
That's between you and them. Some landlords allow it. I don't, personally. I want the full deposit before move-in. But there's no law preventing installment payments if you agree to it.

Why This Stuff Actually Matters

Look, security deposit laws aren't exciting. I get it. But getting them wrong has real consequences.

Good landlords who handle deposits properly:

• Keep tenants longer (trust matters)
• Get better reviews online
• Avoid legal problems
• Attract higher quality tenants
• Build better reputations

I've worked with hundreds of landlords through Hemlane's platform. The ones who document everything, communicate clearly, and follow the law consistently? They almost never have disputes. The ones who wing it? They're constantly dealing with headaches.

Our platform tracks deposits separately, generates compliant itemized statements, and automates the timeline reminders. You can absolutely manage this yourself with spreadsheets and calendars. But whether you use software or paper files, the principles don't change: document everything, treat deposits as tenant money held in trust, and follow the law exactly.

Bottom Line

North Dakota's security deposit laws are actually pretty fair. The state gives landlords reasonable protection while preventing tenant abuse.

Three keys to staying out of trouble:

1. Document everything - Photos, receipts, signed checklists
2. Communicate clearly - No surprises, everything in writing
3. Meet your deadlines - That 30-day window is sacred

Do these things consistently, and you'll avoid 95% of security deposit problems. The other 5%? Sometimes people are just difficult. That's what small claims court exists for.

If you're managing properties in North Dakota and want to simplify this whole process, Hemlane handles deposit tracking, automated rent collection, maintenance coordination, and lease management all in one place. We built it specifically to help landlords avoid the mistakes I made early in my career.

Disclaimer: This article provides general information and shouldn't be considered legal advice. Security deposit laws can vary by locality, and specific situations may require consultation with a North Dakota real estate attorney. For legal assistance, contact Legal Services of North Dakota or a private attorney.

About Hemlane: Hemlane is property management software that helps landlords and property managers streamline operations from tenant screening through lease-end. Our platform includes AI-powered listing distribution, automated rent collection, 24/7 maintenance coordination, and comprehensive financial tracking. Learn more at hemlane.com.