Whether you rent from the Owner direct or their Agent (like OBX Housing), everyone must follow the North Carolina Tenant Security Deposit Act. This Act sets out the responsibilities for Residential Tenants, Landlords and their Agents regarding holding, use and disbursement of the Tenant Security Deposit. The Act is referred to by North Carolina General Statute Sections 42 – 50 and 42 – 56. It applies to all residential properties except the rental of single rooms. It does not require Landlords or their Agents to collect a Security Deposit but most Landlords and Agents do in order to assure that they will be reimbursed if certain specified losses are caused by Tenants.
If a Landlord hires someone to help them manage or rent their property, the person must be licensed by the North Carolina Real Estate Commission and like the Landlord, must comply with the North Carolina Tenant Security Deposit Act as well as the North Carolina Real Estate License Law and various rules adopted by the Real Estate Commission when renting the Owners’ properties.
This article is the second part of a series that will set forth certain Questions and Answers about Tenant Security Deposits in North Carolina that can be viewed on our website or on our Facebook page.
Q: Can my Security Deposit be placed in an interest-bearing account?
A: Yes, under certain conditions. If a real estate Agent is managing a property for the Owner, they may place your security deposit in an interest-bearing trust account only if they have the written permission of both you and the Owner. If your lease authorizes the Agent to place your Security Deposit into an interest bearing trust account, the authorization in the lease must be stated clearly. The interest may be paid to you, the Landlord or the Agent depending on what the lease agreement states.
Q: What will happen to my Security Deposit at the end of my lease?
A: If you stay for the entire lease term and you have paid all rent due, the Landlord or their Agent may deduct from your Security Deposit only the actual cost of repairing any damage which you have done to the property. You cannot be charged for damaged caused by “ordinary wear and tear.” What constitutes “ordinary wear and tear” must be determined on a case by case basis. For example, if you are the most recent tenant in the property, the Landlord cannot charge you to replace such items as carpet, plumbing or appliances which need replacement because they are old and worn out. In fact, you cannot be charged for even contributing to the normal wear and tear of such items. On the other hand, if you caused the item to wear out because of your mistreatment of it, you may be charged for the amount of unusual wear which caused (but not the entire cost of replacement). Ordinarily, costs for routine carpet cleaning and maintenance (painting, carpet cleaning, etc.) may not be deducted from your Security Deposit unless it is stated in your Lease Agreement. However, if you leave the property so filthy that unusual or extraordinary measures are necessary to clean or restore the premises, the Landlord may deduct such cleaning from your Security Deposit.
Q: What will happen to my Security Deposit if I vacate the property before the end of my lease?
A: In addition to any physical damage that you may have caused to the property, the Landlord may also deduct from your Security Deposit any actual damaged caused by your moving out before the end of your lease; however, they may not charge you a “termination fee” or impose any other penalty or forfeiture of the deposit for your early termination and must use their best efforts to fill the vacancy as soon as possible. For example, your rent is $1000 per month and you move out 2 months before the end of your lease. If it takes the Landlord or their Agent one month to re-rent the property, $1000 may be deducted from your Security Deposit as lost rent for the period during which the property was vacant. The Landlord may also use the Security Deposit to recover any reasonable fees or commission charged by a licensed broker to re-rent the property.
Q: What will happen to my Security Deposit if for some reason, I am unable to pay my rent?
A: If you fail to fulfill your obligations under the lease, including your obligation to pay rent, the Landlord or Agent may evict you from the property. The court proceeding is known as “Summary Ejectment.” In addition to having you removed from the property, the Landlord or Agent may recover from you any unpaid rent, late fees, and of course the cost of repairing any physical damage which you may have caused to the property-but, not damage due to ordinary wear and tear. In addition, if you leave behind any of your personal property (furniture, clothing, etc.) the Landlord may also recover from you the cost of storing your property. If your Security Deposit will not cover the Landlords damages for unpaid rent, physical damage to the property and storage of your personal property, you will be liable for payment of any remaining costs. If a civil judgment is entered against you by the court, it could adversely affect your credit rating as it is reported by the Clerk of Courts office to all credit bureaus.
Q: Is there a deadline by which the Landlord or Agent must return my Security Deposit?
A: Within 30 days after the termination of your tenancy, the Landlord or Agent must send you either a full refund of your Security Deposit or a written itemized accounting of any deductions along with any remaining refund amount. Where the full amount of damage cannot be determined within 30 days, the Landlord or Agent must send you a written interim account of deductions claimed, followed by a final accounting no later than 60 days following the end of a tenancy. So, it is important to give your Landlord or Agent a full forwarding address. If you cannot be located, the Landlord or Agent must hold any refund due for at least six months in their trust account. If the Landlord or Agent fails to refund your Security Deposit or make the required accounting, you can sue for recovery of the Security Deposit and reasonable attorney fees. The failure to make the accounting as required under the Act is a forfeiture of the Landlord’s right to retain any portion of the Security Deposit.
Q: What will happen to my Security Deposit if the ownership or management of the property that I rent is transferred to someone else?
A: If the Landlord who collected your Security Deposit transfers ownership of the property to someone else during your lease term, they must either refund your Security Deposit to you or transfer your Security Deposit to the new Owner (after making allowable deductions) and notify you in writing of the new Owner’s name and address. In either case, your Security Deposit must be refunded or notice given to you of the new Owner’s name and address within 30 days of the transfer. Likewise, if you have paid your Security Deposit to the Landlord’s Agent and the Agent discontinues managing the property during the term of your lease, the Agent must either transfer your Security Deposit to the Landlord or Owner or with the Owner’s permission transfer your Security Deposit to the new Manager/Agent. In either case, the Agent to whom you paid your Security Deposit must notify you of the new location of your Security Deposit and if your Security Deposit is being transferred to the Owner, advise the Landlord of their responsibilities to the Tenant under the Tenant Security Deposit Act (NC General Statute 42-50).
For additional information, please visit the North Carolina Real Estate Commission website site at
www.ncrec.gov or by calling 919-875-3700