Security deposits are one of the most common sources of disputes between landlords and tenants. In Minnesota, strict rules govern how deposits must be collected, stored, and returned. Failing to follow these laws can result in expensive penalties — sometimes up to double the amount wrongfully withheld.
This blog post breaks down everything Minnesota landlords need to know about legally handling security deposits.
1. How Much Can You Charge?
Minnesota law does not limit the amount you can charge for a security deposit. However, most landlords set the deposit equal to one month’s rent to stay competitive and reasonable for tenants.
Pro Tip: Be transparent about your deposit amount in rental listings to avoid surprises for applicants.
2. Storing Security Deposits
Unlike some states, Minnesota does not require landlords to keep deposits in a separate bank account. However, landlords must pay tenants interest on their deposit once they move out. The interest rate is set by law and changes each year (Minnesota Statutes §504B.178).
3. Returning Security Deposits
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Timeline: Landlords must return the deposit within 21 days after the tenant moves out.
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Exception: If the property is condemned, the deposit must be returned within 5 days.
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Deductions: You may deduct for unpaid rent, damages beyond normal wear and tear, or other lease violations — but you must provide an itemized written statement explaining each deduction.
Failure to return the deposit on time can result in tenants being awarded double the amount wrongfully withheld, plus attorney’s fees.
4. What Counts as “Normal Wear and Tear”?
This is one of the biggest gray areas for landlords. Examples include:
- Faded paint or carpet wear from normal use
- Minor nail holes from hanging pictures
- Loose door handles
Allowed as deductions:
- Cigarette burns or large carpet stains
- Broken doors, windows, or appliances
- Excessive cleaning costs beyond normal turnover
When in doubt, document everything with move-in and move-out inspection checklists and photos.
5. Best Practices for Landlords
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Always give tenants a written receipt for their deposit.
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Conduct a move-in walkthrough with tenants and note existing damage.
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Use a move-out checklist to fairly assess deductions.
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Return the deposit with the itemized statement via mail to the tenant’s forwarding address.
Security deposits may seem simple, but in Minnesota they are one of the most litigated areas of landlord-tenant law. By following state requirements — and keeping detailed records — you can avoid disputes, stay compliant, and maintain professional relationships with your tenants.
For full details, review Minnesota Statutes §504B.178 or check the Minnesota Attorney General’s Landlord-Tenant Guide.
