Minnesota security deposit law

Minnesota does not cap the amount of a security deposit. The deposit rules cover any money that secures the tenant's performance under the rental agreement, except a deposit that is only rent paid in advance.

Minn. Stat. § 504B.178, subd. 1

• A payment taken from a prospective tenant before a rental agreement is signed (other than a reasonable screening fee) needs a conspicuous written agreement stating when it will be returned and that it will be returned within seven days after that happens. Minn. Stat. § 504B.175, subd. 2
• If the parties do sign a rental agreement, that prelease payment must be applied to the tenant's security deposit or rent. Minn. Stat. § 504B.175, subd. 3
• A landlord who breaks the prelease deposit rules owes the payer the amount paid plus half of that amount as a penalty. Minn. Stat. § 504B.175, subd. 4
• The City's Minneapolis guidance limits the deposit to one month's rent. If more than one month's rent is collected upfront, the deposit cap drops to half a month's rent, and the tenant may pay it over three months. City of Minneapolis: renter rights guidance

Within three weeks after the tenancy ends, and after you receive the tenant's mailing address or delivery instructions, return the deposit with interest or give the tenant a written statement showing the specific reason for keeping any part of it. If the tenant leaves because the building was legally condemned for reasons not caused by the tenant's willful, malicious or irresponsible conduct, the deadline is five days.

Minn. Stat. § 504B.178, subd. 3

• Mailing the deposit or statement first class, postage prepaid, in a correctly addressed envelope with a return address within the deadline counts as on time. Minn. Stat. § 504B.178, subd. 3(b)
• You may keep only amounts reasonably necessary to cover unpaid rent or other money due under the agreement, or to restore the home to its condition at the start of the tenancy, ordinary wear and tear excepted. In any dispute you must prove the reason for keeping it. Minn. Stat. § 504B.178, subd. 3(b), (c)
• Missing the deadline, or failing to give the move-in and move-out inspection notices and complete an inspection the tenant asks for, makes you liable for the amount withheld plus interest as a penalty, on top of the amount wrongfully withheld with interest. Minn. Stat. § 504B.178, subd. 4
• Keeping a deposit in bad faith adds punitive damages of up to $500 per deposit. Bad faith is presumed if you missed the return rules, unless you return the deposit within two weeks after the tenant sues for it. Minn. Stat. § 504B.178, subd. 7
• A tenant may not withhold rent for the last payment period on the ground that the deposit should cover it, except under a month-to-month agreement where neither side has served a notice to quit. A tenant who keeps withholding after your written demand and notice of the rule owes a penalty. Minn. Stat. § 504B.178, subd. 8
• When you sell or otherwise give up your interest in the property, within 60 days (or sooner if the new owner must account for the deposit first) either transfer the deposit with interest to the new owner and tell the tenant who holds it, or return it to the tenant. Minn. Stat. § 504B.178, subd. 5
• Any agreement to waive these rules is void. Minn. Stat. § 504B.178, subd. 10

The deposit earns simple, noncompounded interest of 1 percent a year, from the first day of the month after it is paid in full until the last day of the month in which you return it or account for it in good faith, or the date a court enters judgment on it if that comes first. Interest under $1 does not have to be paid.

Minn. Stat. § 504B.178, subd. 2

• The statute says the landlord holds the deposit for the tenant and does not receive it in a fiduciary capacity. No section of the landlord and tenant chapter requires a separate or interest-bearing account. Minn. Stat. § 504B.178, subd. 2
• When the property changes hands, the deposit moves or is returned with its interest, and the new owner takes on the old owner's obligations for it. Minn. Stat. § 504B.178, subd. 5 Minn. Stat. § 504B.178, subd. 6

At the start of a tenancy, or within 14 days after the tenant moves in, tell the tenant they may ask for an initial inspection to record existing problems, so they are not charged for them later. If the tenant asks, schedule it at a time you both accept.

Minn. Stat. § 504B.182

• Within a reasonable time after either side gives notice to end the tenancy, or before the lease ends, tell the tenant in writing that they may ask for a move-out inspection and be present for it. Minn. Stat. § 504B.182, subd. 2
• A requested move-out inspection happens at a reasonable time, no earlier than five days before the tenancy ends or the tenant plans to leave, so the tenant can fix problems before any deposit deduction. Minn. Stat. § 504B.182, subd. 2
• If the tenant agrees, you may instead acknowledge in writing photos or videos of the home and agree on its condition at the start or end of the tenancy. Minn. Stat. § 504B.182, subd. 1(b)
• Skipping these notices, or not completing an inspection the tenant asks for, triggers the deposit penalty. Minn. Stat. § 504B.178, subd. 4
• A lease term waiving these rights is void, except where the tenant chooses not to ask for an inspection or agrees to the photo alternative. Minn. Stat. § 504B.182, subd. 4