North Dakota Security Deposit Laws in 2024

What is a Security Deposit in North Dakota?

A security deposit is a sum of money paid by a tenant at the start of a lease to protect the landlord against potential damages or unpaid rent. The landlord holds the deposit during the tenancy, and may use it to pay for any damage beyond normal wear and tear when the tenant moves out. The security deposit also gives the landlord some financial security if the tenant breaks the lease terms or fails to pay rent. 

The main purposes of collecting a security deposit in North Dakota are:

• Compensate for physical damages to the unit beyond normal wear and tear
• Pay for any unpaid rent or utilities
• Cover the costs of cleaning or repairs after the tenant moves out
• Provide some protection in case the tenant violates the lease 

The security deposit belongs to the tenant, but the landlord temporarily holds it as a form of insurance during the lease term. As long as the tenant fulfills their lease obligations, pays rent on time, and leaves the unit in good condition, they are entitled to get their full deposit back at the end of the tenancy.

Maximum Security Deposit Amount in North Dakota

Unlike some other states, North Dakota does not have a maximum limit set by law on the amount a landlord can charge for a security deposit. This gives landlords a lot of leeway to require any deposit amount they see fit when renting out a property. 

With no legal cap, security deposits in North Dakota are primarily limited by market forces and negotiations between the landlord and tenant. Landlords with higher-end properties can often get away with charging 1-2 months rent or more as a security deposit, while deposits for cheaper rentals may be a smaller fraction of the monthly rent.

The lack of a maximum security deposit law cuts both ways for renters. On the one hand, it means you could be asked to put down a sizable deposit based on the landlord's discretion. But it also means you may be able to negotiate a lower deposit if you shop around or have good credit/references. The key is to clarify the deposit amount before signing a lease and anticipate needing that amount available upfront.

Some tenant advocacy groups have argued for a 1-month rent cap on security deposits in North Dakota as in other states. But so far there has been no legislative movement to put legal limits in place. For now, North Dakota remains a market-driven state when it comes to security deposit amounts that landlords can charge.

Pet Deposits in North Dakota

Landlords in North Dakota are permitted to charge an extra security deposit for tenants with pets. There is no limit set by law on the maximum amount a landlord can charge for a pet deposit. This gives landlords discretion to charge a pet deposit they deem appropriate based on factors like the size of the pet, potential damage or noise, and number of pets. 

Tenants should be aware that pet deposits can be very expensive in North Dakota. Landlords may require pet deposits of $500 or more, especially for large dogs. The pet deposit is in addition to the standard security deposit. Some landlords may also charge monthly "pet rent" on top of the base rent. Tenants with pets should clarify all deposits and fees before signing a lease.

While pet deposits are unregulated in North Dakota, a landlord still cannot use the deposit for normal wear and tear. Pet damage beyond normal wear and tear, like scratched floors or a urine stain in the carpet, can be deducted from the pet deposit. Landlords must refund any unused portion of the pet deposit within 30 days after the tenant moves out, just like a standard security deposit. Disputes over pet deposit deductions can be handled through small claims court.

Storing the Security Deposit in North Dakota

In North Dakota, landlords are required to keep security deposits in a separate bank account rather than mixing the funds with their own money. This is to help protect the tenant's deposit and ensure it is available when it comes time to return it.

Landlords must deposit security deposits into an account at a financial institution located in North Dakota. The funds need to be kept separate from the landlord's own money and cannot be comingled in any way. 

While held by the landlord, security deposits in North Dakota earn interest at the legal rate. Currently, this interest rate is 6% per year in the state. Interest begins accruing once the deposit is made, and tenants have a right to receive the interest when their deposit is returned.

By mandating that deposits are held separately and earn interest, North Dakota law aims to incentivize landlords to properly return deposits at the end of the lease. The interest provides compensation to the tenant for giving the landlord temporary use of the funds during the tenancy.

Using the Deposit as Last Month's Rent in North Dakota

In North Dakota, landlords cannot use a tenant's security deposit to pay for the last month's rent unless they receive written consent from the tenant. This consent must be obtained at the start of the lease, not when the tenant is moving out.

The written consent should specifically state that the tenant agrees to allow the security deposit to be used for the last month's rent. If such consent is not obtained, the landlord must return the full security deposit to the tenant at the end of the lease term, as long as there are no damages or unpaid rent. 

Tenants should be cautious about agreeing to allow the deposit to be used for last month's rent. If damages or back rent is owed, the tenant would still be liable to pay those costs even though the deposit was already paid out. It protects the tenant to have the deposit refunded separately from the last month's rent.

Reasons for Deductions from the Deposit in North Dakota

Landlords in North Dakota can legally deduct from a tenant's security deposit for the following reasons:

Damages beyond normal wear and tear

Landlords can deduct the reasonable cost to repair any damages to the rental unit that exceed normal wear and tear. This includes damages such as stained carpets, broken appliances, holes in walls, broken windows, etc. The landlord must provide documentation such as receipts or repair estimates.

Unpaid rent

If the tenant fails to pay rent or moves out owing rent, the landlord can use the security deposit to cover the unpaid amount. The landlord does not need the tenant's consent to deduct for unpaid rent.

Cleaning fees

Landlords can deduct reasonable fees for cleaning the unit at the end of the tenancy if the tenant left the property substantially dirtier than when they moved in. This does not include minor cleaning between tenants. The landlord should document the unit's condition to justify cleaning deductions.

Normal wear and tear that landlords cannot deduct for includes minor cosmetic issues like small nail holes, worn carpeting, faded paint and wall scuffs. Landlords bear the burden of proof if deducting for damages and should provide tenants an itemized statement of deductions.

Returning Security Deposits in North Dakota

In North Dakota, landlords must return a tenant's full security deposit within 30 days after the termination of the rental agreement and delivery of possession. This applies whether the tenant moves out at the end of the lease or breaks the lease early.

The 30 days is calculated based on calendar days, including weekends and holidays. For example, if the tenant moves out and returns the keys on July 1st, the landlord must mail the refund check or itemized deductions by July 31st. 

If a landlord fails to return the deposit within 30 days, the tenant can file a lawsuit to recover up to twice the amount wrongfully withheld, plus reasonable attorney's fees. It does not matter whether the landlord had a valid reason for keeping the deposit or not - the failure to comply with the 30 day deadline makes the landlord liable.

Some best practices for tenants to ensure they receive their deposit back on time include:

• Providing proper written notice as required by the lease  
• Conducting a walkthrough inspection and documenting condition
• Providing a forwarding address 
• Following move-out cleaning requirements
• Returning all keys and access items promptly

Following North Dakota law, responsible landlords will return security deposits within 30 days after the tenant completes move-out. However, disputes still arise in some cases. Tenants have legal options if the landlord unjustly retains their deposit past the deadline.

Consequences for Wrongfully Withholding a Deposit in North Dakota

If a landlord in North Dakota wrongfully withholds all or part of a tenant's security deposit, the tenant has the right to take legal action. Under North Dakota law, if a landlord fails to return the deposit or provide a written statement of deductions within 30 days after termination of the lease, the landlord forfeits all rights to withhold any portion of the deposit.

Additionally, if a landlord is found to have wrongfully withheld a security deposit in bad faith, the tenant can recover up to two times the amount wrongfully withheld, plus reasonable attorneys fees. This serves as a deterrent for landlords to unlawfully keep deposits that rightfully belong to the tenant. 

Tenants should carefully review the statement of deductions and evidence provided by the landlord if their full deposit is not returned. If any deductions seem invalid, exaggerated, or lack proper documentation, the tenant may have grounds to pursue legal action to recover their full deposit plus damages. Having an extensive move-in checklist and move-out documentation is important for tenants to dispute improper deposit withholdings.

Transferring the Deposit to a New Owner in North Dakota

When a property with tenants is sold or transferred to a new owner or landlord in North Dakota, the security deposits automatically transfer to the new owner. The previous landlord must provide the new owner with any security deposit funds and a record of the condition of the property at the time of transfer.

North Dakota law requires written notice to be sent to the tenant that identifies the new landlord, their address, and states that the security deposit has been transferred. This notice should be provided by either the previous landlord or the new landlord within 30 days of the transfer. 

Tenants must continue paying rent to the previous landlord until they receive proper notice that the deposit and property have been transferred to a new owner. After receiving written confirmation, tenants should begin communicating with and paying rent to the new landlord or owner.

Security Deposit Disputes and FAQs

Security deposits can often lead to disputes between landlords and tenants if there is disagreement over damages, deductions, or failure to return the deposit. Here is a summary of key points and common disputes:

What are valid reasons for a landlord to deduct from the deposit in North Dakota?

A landlord can legally deduct for unpaid rent, damage beyond normal wear and tear, and reasonable cleaning fees if outlined in the lease. Normal wear and tear is not grounds for deductions.

What if a landlord does not return the deposit within 30 days?

The tenant can sue for up to 2x the amount wrongfully withheld plus reasonable attorney's fees.

What if there is a dispute over alleged damages?

The tenant should document the move-in and move-out condition with photos/videos and invoices. Disputes may need to be settled in small claims court if the landlord refuses to return the full deposit.

Who has the burden of proof in security deposit disputes?

The landlord must provide an itemized statement of deductions and proof of damages to justify keeping any of the deposit. 

Can a landlord deduct for painting or carpet cleaning?

Not if it is just to refresh normal wear and tear. Minor scuffs or stains are expected as part of living in the unit.

What if the tenant disagrees with the deduction amount?

The tenant can try negotiating with the landlord first, but may need to file in small claims court if the dispute cannot be resolved. Getting estimates for work can help contest unreasonable deduction amounts.

Does a tenant have to be present for the move-out inspection?

No, but it is recommended to document the condition at move-out. Take ample photos/videos and request a walkthrough with the landlord.

Can the landlord charge fees if the tenant does not do a move-out walkthrough?

No, the walkthrough is for the tenant's benefit and cannot be forced upon them. But it is wise to do one to prevent deposit disputes.