North Dakota security deposit law: interest-bearing accounts and treble damages
North Dakota Century Code 47-16-07.1 is one of the stricter deposit statutes. The money goes into a federally insured interest-bearing account for the tenant's benefit, the cap is one month's rent in most cases, and a deposit withheld without reasonable justification can cost three times the amount.
Where must the deposit be held?
The first subsection says a lessor who requires money as a security deposit, however denominated, shall deposit it in a federally insured interest-bearing savings or checking account for the benefit of the tenant. The deposit and any interest that builds up must be paid to the tenant when the lease ends, subject to the deductions allowed later in the section.
There is a small relief for short stays: a lessor is not required to pay interest on a deposit if the period of occupancy was less than nine months. For anything longer, interest follows the deposit, so the account choice is a bookkeeping duty, not only a banking preference.
How big can the deposit be?
The general limit is one month's rent. The statute then names two cases where up to two months is allowed. A lessor may accept up to two months from an individual convicted of a felony offense as an incentive to rent to that person, and may demand up to two months from an individual who has had a judgment entered against them for violating the terms of a previous rental agreement.
Pets are handled separately. A lessor may charge a pet security deposit for an animal that is not a service animal or companion animal required by a tenant with a disability as a reasonable accommodation under fair housing laws. A pet deposit may not exceed the greater of two thousand five hundred dollars or an amount equal to two months' rent.
What can you deduct, and how do you tell the tenant?
At the end of the lease you may apply the deposit and accrued interest toward three things: damage from the tenant's pet or the negligence of the tenant or a guest, unpaid rent, and the cost of cleaning or repairs the tenant was responsible for that are needed to return the unit to its original state, reasonable wear and tear excepted.
Any part of the deposit you do not pay back must be itemized. The itemization, the amount due and a written notice go to the tenant at the last address furnished to you within thirty days after the lease ends and the tenant delivers possession. The notice states what the tenant still owes you or the refund due.
Example a made-up tenant leaves after fourteen months with a $950 deposit that earned $11 of interest. The landlord documents $120 of repair for a wall damaged by a guest and mails the itemization within thirty days. The tenant is owed $950 plus $11 interest minus $120, or $841.
How do treble damages work?
The statute says a lessor is liable for treble damages for any security deposit money withheld without reasonable justification. That is the harshest remedy in this batch of states. The practical reading is that a deduction you cannot explain with a photo, an invoice or a dated checklist is the one to leave out.
Money the tenant never claims is not simply yours. Amounts not claimed from the lessor within one year after the lease ends are subject to the state's unclaimed property reporting requirements.
Selling or transferring the property
When ownership transfers, the deposit and accrued interest must be transferred to the new owner. The seller is not relieved of liability until the transfer is made. Whoever holds the lessor's interest when the lease ends is bound by the section even if they were not the lessor who took the deposit.
How DoorKeeping fits
If your deposits sit in an interest-bearing account, DoorKeeping lets you record each tenant's deposit and the interest credited to it, so the final figure is ready at move-out. The thirty-day date appears on your list and the tenant letter is drafted for your approval. DoorKeeping gives no legal advice, and your funds stay in your own bank. This is general information, not legal advice. Check the current statute or ask a local attorney before you rely on it.
Sources
Questions
- What is the maximum deposit in North Dakota?
- Generally one month's rent. Up to two months is allowed in two named cases, and a pet deposit may be as much as the greater of $2,500 or two months' rent.
- Must a North Dakota landlord pay interest on a deposit?
- Yes, the deposit goes in an interest-bearing account for the tenant and interest is paid with it, except that interest is not required if the occupancy was under nine months.
- How long does a North Dakota landlord have to itemize deductions?
- Thirty days after the lease ends and the tenant delivers possession, by mailing or delivering the itemization, the amount due and a written notice.
- What is the penalty for withholding a deposit without reason?
- Treble damages for any deposit money withheld without reasonable justification.