As a property owner, security deposits shield you from different kinds of losses and ensure that tenant-caused damages are covered.
That said, you must understand what constitutes a valid reason to deduct from this deposit. Different states have different conditions on how to properly handle a security deposit. In this article, we will focus on the Minnesota laws.
As a property owner in Minnesota, security deposits will be very beneficial to you.
With a security deposit, you can cover:
In the state of Minnesota, there’s no maximum limit for collecting a security deposit. However, it’s best to check with your local town or municipality. There may be amendments and additional policies that may affect your rental business.
In Minnesota, you are required to refund security deposits. If there are no deductions to pay for damages, the money must be returned to the tenant.
Under the Minnesota law, a tenant’s security deposit must be placed in an interest-bearing account. It’s also presumed that the account will be earning a minimum of 1% per year.
In Minnesota, you are expected to hand the tenant a receipt if the security payment is made in cash. If the cash payment was conducted in person, the receipt should be given immediately. If it was not done through a personal interaction, you have 3 days to provide the tenant with a receipt.
Under the Minnesota Law, there are conditions that warrant you to claim the entire or a portion of the security deposit of a tenant. You can make deductions if a tenant failed to pay his rent and/or caused major damages to the property. A previously mentioned, this excludes normal wear and tear. In addition, if the tenant violated the lease, the security deposit can be used to cover the potential loss.
In Minnesota, once a tenant moves out, you are not required to perform a walk-through inspection.
As a property owner in Minnesota, you must refund the security deposit within three weeks of a tenant’s move out. However, if the reason for move-out was because the rental unit was unsafe or posed risks, you are required to refund the security deposit within five days.
The remaining security deposit, after the allowable deductions and the added accrued interest, must be returned to the tenant. This should be sent through a first-class certified mail to the tenant’s forwarding address. It can also be delivered directly in person.
You must also provide the tenant with a handwritten list of the itemized deductions and their reasons. When a property owner doesn’t comply with the given conditions, there are consequences.
Not to mention, withholding a tenant’s security deposit altogether can have very grave consequences. For instance, you would be subjected to pay twice the withheld security deposit amount and accrued interest.
You have added responsibilities when you sell your rental property.
If your property receives a new owner, you must do one of the two options within 60 days.
Here are your two options:
If you have specific questions, hire the services of a qualified Minnesota attorney. Alternatively, you can seek help from a knowledgeable property management company.
Please note that this blog should not be used as a substitute for legal advice from a licensed attorney in Minnesota. Laws frequently change, and this post might not be updated at the time of your reading. Please contact us if you have questions regarding this content, or regarding any other aspect of your property management needs.