Minnesota Security Deposit Laws

As a property owner, security deposits shield you from different kinds of losses like unpaid rent and ensure that tenant-caused damages are covered as long as they are not normal wear and tear.

That said, you must understand what Minnesota law defines as 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 that govern your rental property.

As a property owner in Minnesota, security deposits will be very beneficial to you and help protect your interests in the lease agreement.

With a security deposit, you can cover a areas in the month to month tenancy:

• Unpaid bills post move-out: It’s unfortunate, but sometimes tenants leave the rental unit without exercising accountability for their due bills. The security deposit provides a shelter from that situation.
• Property damage costs: Negligent tenants can cause damages to furnishings and appliances. These will need repairing or replacing. A security deposit can help you cover these expenses. However, it’s important to note that a security deposit should not be used to cover normal wear and tear costs.

• Cleaning charges: Some tenants may leave the rental unit in complete or semi-disarray. For instance, carpets, floors and curtains can be dirty. The security deposit can contribute greatly in keeping the property spotless once again.
• Unpaid rent: In some cases, a tenant can fail to meet their monthly rent. A security deposit can provide a buffer to cover unpaid rent damage or cover the last month’s rent depending on the specific agreement.

Here’s an Overview of Minnesota’s Security Deposit Laws

1. Minnesota Security Deposit Limit

Does Minnesota security deposit law limit how much a landlord can charge?

According to the Minnesota Attorney General’s office, there’s no maximum limit for collecting a security deposit from a prospective tenant. 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 or pre lease deposit.

But considering there is no Minnesota law limit to security deposits, general practise is to charge one month’s rent but landlords tend to charge no more than two month’s rent on security deposits.

2. Nonrefundable Fees

Minnesota landlords are required to refund security deposits. If there are no deductions to pay for damages, the money must be returned to the tenant.

3. Storing a Tenant’s Deposit

Under the Minnesota law, a tenant’s security deposit must be placed in an interest-bearing account. It’s also presumed that the account containing the security deposits will be earning a minimum of 1% per year on the pre lease deposit.

4. Written Notice after Security Deposit Receipt

In Minnesota, you are expected to hand the tenant a written notice 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 to their forwarding address.

5. Reasons to Withhold a Tenant’s Security Deposit in Minnesota

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 had rent withheld during the tenancy or caused major damages to the property or caused health or safety violations. 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 during the rental period.

6. A Walk-Through Inspection

In Minnesota, once a tenant moves out, you are not required to perform a walk-through inspection.

7. Security Deposit Refund in Minnesota

As a property owner in Minnesota, you must return the tenant’s 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 to the tenants forwarding address.

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. You can also return the tenant’s security deposit 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.

8. Change in Property Ownership

As per security deposit law, 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 under security deposit law:

• Return the security deposit funds to the tenant.
  or
• Transfer the security deposit to the new owner, including the accrued interest.
  You must notify the tenant, in writing, with information regarding the new owner including his name and address. You must also include the transferred amount. This will inform the tenant that the security deposit is now in the hands of the new owner. The tenant has a 20-day period to verify and make corrections to the transferred amount if need be.

Bottom Line: MN Security Deposit Rules

If you have specific questions regarding managing a lease agreement, the security deposit laws, defining normal wear and tear,  rent increase laws, or landlord-tenants laws, 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.