Minnesota Security Deposits: 1 Percent Interest and a Three-Week Return
James Brazil lives in Mérida, Mexico. He founded Swift Agent Sites and studied Classics at the University of Mississippi.
Published · Updated
Minnesota does not set a general statutory cap on the amount of a residential security deposit. The deposit must bear simple, noncompounded interest at the rate of one percent per year. A landlord must return the deposit with interest, or furnish a written statement of the specific reason for any withholding, within three weeks after the tenancy ends.
Those rules come from section 504B.178. Section 504B.182 also requires notice of the tenant's option to request an initial inspection and a move-out inspection.
When must the deposit come back, and what may be withheld?
Section 504B.178 applies to any deposit of money whose function is to secure performance of a residential rental agreement, other than a deposit that is exclusively an advance payment of rent. Interest is computed from the first day of the next month following full payment of the deposit to the last day of the month in which the landlord, in good faith, complies with the return rules, or to the date of judgment in a civil action, whichever is earlier. Any interest amount less than $1 is excluded from the section.
The landlord must, within three weeks after termination of the tenancy, or within five days after the tenant leaves because of a legal condemnation not caused by the tenant's willful, malicious, or irresponsible conduct, and after receipt of the tenant's mailing address or delivery instructions, return the deposit with interest or furnish a written statement showing the specific reason for withholding all or part of it. Mailing first class, postage prepaid, to the address the tenant furnished, within that time, is sufficient compliance with the deadline.
The landlord may withhold only amounts reasonably necessary to remedy tenant defaults in the payment of rent or of other funds due under an agreement, or to restore the premises to their condition at the commencement of the tenancy, ordinary wear and tear excepted. In any action concerning the deposit, the burden of proving the reason for withholding, by a fair preponderance of the evidence, is on the landlord.
If a landlord fails to provide the written statement within three weeks, or within the five-day condemnation period, or fails to transfer or return a deposit as required when the landlord's interest ends, or fails to provide the inspection notices and complete inspections when requested under section 504B.182, the landlord is liable to the tenant for damages equal to the portion of the deposit withheld, plus interest, as a penalty, in addition to the portion wrongfully withheld and interest. In plain terms, a wrongful or unexplained withholding can cost the landlord that amount twice, plus interest.
Leave a forwarding address in writing. Take dated photos at move-in and move-out. Ordinary wear and tear is not a lawful deduction.
What inspection rights do you have?
Section 504B.182 requires the landlord, at the start of a residential tenancy or within 14 days after the tenant occupies the unit, to notify the tenant of the option to request an initial inspection to identify existing deficiencies and avoid later deposit deductions. If the tenant requests an inspection, the parties shall schedule it at a mutually acceptable date and time. In lieu of an inspection, when the tenant agrees, a landlord may provide written acknowledgment of photos or videos and agree to the condition of the unit at the start or end of the tenancy.
Within a reasonable time after notice that the tenancy will end, or before the end of the lease term, the landlord shall notify the tenant in writing of the option to request a move-out inspection and of the right to be present. If requested, the inspection shall be at a reasonable time, but no earlier than five days before termination or the day the tenant plans to vacate, so the tenant has a chance to remedy identified deficiencies and avoid deductions. If the tenant does not request a move-out inspection, the landlord's duties under that subdivision are discharged.
Leave copies of the lease, the inspection notices, move-in and move-out photos, and your forwarding-address letter in one file. If a statement of deductions arrives, compare each item with ordinary wear and tear and with the inspection notes. A deposit that was exclusively advance rent is outside section 504B.178, but a mixed deposit that secures performance of the lease is inside the section.
Use those inspection options. Send a written request, attend if you can, and keep a copy of any deficiency list and photos. Those notes are often the difference between wear and tear and a later deduction.
FAQ
Is there a Minnesota cap of one or two months' rent on a security deposit?
No general statutory cap on the amount is stated in section 504B.178. The deposit must earn 1 percent simple interest, and interest under $1 is excluded.
How quickly must the deposit be returned?
Within three weeks after termination of the tenancy, or within five days after the tenant leaves because of a legal condemnation not caused by the tenant, after the landlord has the tenant's mailing address, under section 504B.178.
What if the landlord keeps the deposit without a written explanation?
The landlord can be liable for the withheld amount plus that amount again as a penalty, plus interest, as section 504B.178, subdivision 4, provides.
Can I request a move-in or move-out inspection?
Yes. Section 504B.182 requires the landlord to notify you of those options and, if you request them, to schedule the inspections as the statute describes.
If a Minnesota landlord is holding a deposit after a move-out, talk with a licensed local agent if a related insurance question arises, and use the official three-week and inspection rules in sections 504B.178 and 504B.182.
Sources: Minnesota Statutes section 504B.178; Minnesota Statutes section 504B.182.
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