What Can a Landlord Deduct From a Security Deposit in North Carolina?

What can a North Carolina landlord deduct from a security deposit?

Only the eight uses G.S. 42-51(a) lists:

1. The tenant’s possible nonpayment of rent, and costs for water or sewer service under G.S. 62-110(g) and electric service under G.S. 62-110(h)
2. Damage to the premises, including damage to or destruction of smoke alarms or carbon monoxide alarms
3. Damages from the nonfulfillment of the rental period, except where the tenant ended the agreement under G.S. 42-45 or 42-45.1, was forced to leave by the landlord’s violation of Article 2A, or was constructively evicted by the landlord’s violation of G.S. 42-42(a)
4. Unpaid bills that become a lien against the property because of the tenant’s occupancy
5. The costs of re-renting after a breach by the tenant, including reasonable fees or commissions paid to a licensed real estate broker to re-rent
6. The costs of removing and storing the tenant’s property after a summary ejectment proceeding
7. Court costs
8. Any fee permitted by G.S. 42-46

The subsection, word for word:

Security deposits for residential dwelling units shall be permitted only for the following: (1) The tenant's possible nonpayment of rent and costs for water or sewer services provided pursuant to G.S. 62-110(g) and electric service pursuant to G.S. 62-110(h). (2) Damage to the premises, including damage to or destruction of smoke alarms or carbon monoxide alarms. (3) Damages as the result of the nonfulfillment of the rental period, except where the tenant terminated the rental agreement under G.S. 42-45, G.S. 42-45.1, or because the tenant was forced to leave the property because of the landlord's violation of Article 2A of Chapter 42 of the General Statutes or was constructively evicted by the landlord's violation of G.S. 42-42(a). (4) Any unpaid bills that become a lien against the demised property due to the tenant's occupancy. (5) The costs of re-renting the premises after breach by the tenant, including any reasonable fees or commissions paid by the landlord to a licensed real estate broker to re-rent the premises. (6) The costs of removal and storage of the tenant's property after a summary ejectment proceeding. (7) Court costs. (8) Any fee permitted by G.S. 42-46. N.C. Gen. Stat. § 42-51(a)

A closed list, applied as one

“Shall be permitted only for the following” makes this a closed list, and the North Carolina Court of Appeals has treated it as one. In Neil v. Kuester Real Estate Services (2014), a published decision, tenants complained of a $40 lease “administrative fee” charged for breaking lease rules. The court said that withholding money for something not on the list calls for a refund of it, that the Act “simply bars landlords from taking those amounts out of security deposits”, and that nothing in the Act stops a landlord billing such a charge separately. It did not decide whether that fee had in fact been deducted.

So a charge that is not on the list, such as a fine for breaking a lease rule, may not be taken from the deposit. Whether the tenant owes it separately depends on the lease and other law: the Act governs what may be taken from the deposit, and does not itself decide what a tenant owes. One limit on Neil: it was decided on the list as it stood before October 2012, which had no item (8).

Items with conditions that are easy to miss

Utilities: items 1 and 4

Besides rent, item 1 covers costs for water or sewer service provided under G.S. 62-110(g) and electric service under G.S. 62-110(h). Those are arrangements under which the landlord itself bills tenants for those services as the Utilities Commission allows. A bill the tenant owed a utility company directly is on the list only if it became a lien against the property because of the tenant’s occupancy (item 4).

Rent lost when a tenant leaves early: items 3 and 5

Item 3 lets the deposit cover damages from the nonfulfillment of the rental period, and excludes three situations: a tenant who ended the agreement under G.S. 42-45 (military technicians under 10 U.S.C. 10216) or G.S. 42-45.1 (victims of domestic violence, sexual assault or stalking), a tenant forced to leave by the landlord’s violation of Article 2A, and a tenant constructively evicted by the landlord’s violation of G.S. 42-42(a). A servicemember who ends a lease under the federal Servicemembers Civil Relief Act is not on that list but is protected separately: that Act bars an early termination charge and makes it a crime to knowingly hold a servicemember’s deposit to cover rent accruing after a lawful termination (50 U.S.C. § 3955(e), (h)). North Carolina incorporates that Act into state law, and a knowing violation is an unfair or deceptive trade practice under Chapter 75 (G.S. 127B-28, 127B-34). The amount kept may not exceed actual damages (G.S. 42-52), and a landlord has a duty to mitigate: only the loss that reasonable diligence in re-letting would not have avoided is recoverable (Isbey v. Crews, 1981, a commercial lease in which the court stated the rule for leases generally and put on the tenant the burden of proving that the landlord did not mitigate).

Item 5 is separate: the costs of re-renting after a breach by the tenant, including reasonable fees or commissions paid to a licensed real estate broker to re-rent.

Removal and storage: item 6

Item 6 is the costs of removing and storing the tenant’s property after a summary ejectment proceeding. On our reading, property left behind by a tenant who moved out without an eviction case is not within those words.

Fees: item 8

Item 8 is any fee permitted by G.S. 42-46, and that section sets its own limits. A late fee the lease provides for may not exceed $15 or 5% of the monthly rent, whichever is greater ($4 or 5% of the weekly rent where rent is due weekly), is chargeable only when rent is five calendar days or more late, and only once per late payment. Under a written lease the section also allows one of three eviction-related administrative fees. Where a lease requires the tenant to carry insurance and the tenant does not show proof of it within three business days of the landlord’s request, it allows the landlord’s actual cost of obtaining the coverage and an administrative fee of up to $50 a year. It lists out-of-pocket expenses separately (court filing fees, costs of service, limited attorneys’ fees), and whether item 8 reaches those is not answered by the text. Where the rent is subsidized by HUD, the USDA, a State agency, a public housing authority or a local government, any fee under that section is figured on the tenant’s share of the contract rent only, not on the subsidy (G.S. 42-46(h)(5)). A fee that section does not permit is not made deductible by writing it into the lease.

Cleaning and painting

Cleaning and painting are not on the list of permitted uses by name; “damage to the premises” is. The statute does not answer directly whether they can be charged, and we found no North Carolina appellate decision on whether routine cleaning can be charged as damage to the premises.

The Court of Appeals had carpet-cleaning and painting charges in front of it in Neil v. Kuester (2014) and did not rule on them.

The North Carolina Real Estate Commission’s tenant brochure tells tenants that costs for “routine cleaning and maintenance (painting, carpet cleaning, etc.)” ordinarily may not be deducted, and that the cost of cleaning a unit left “so filthy that unusual or extraordinary measures are necessary” may be. That is the Commission’s reading, not a court’s.

Whatever the answer, nothing may be kept for normal wear and tear, and nothing above actual damages (G.S. 42-52).

Normal wear and tear, and actual damages

G.S. 42-52 sets both limits in one sentence:

The landlord may not withhold as damages part of the security deposit for conditions that are due to normal wear and tear nor may the landlord retain an amount from the security deposit which exceeds his actual damages. N.C. Gen. Stat. § 42-52

The Act gives no definition of normal wear and tear and no examples, and we found no North Carolina appellate decision that defines the phrase or applies it to particular facts. The Court of Appeals has said only that charging for normal wear and tear is a violation answered by a refund of what was wrongly kept (with damages and, if the noncompliance was willful, attorney’s fees also available), and that it has to be decided tenant by tenant (Neil v. Kuester, 2014).

The Real Estate Commission’s brochure offers tenants a working description: carpet, plumbing or appliances that need replacing “because they are old and worn out” cannot be charged, while a tenant whose mistreatment wore an item out may be charged for “the amount of unusual wear” caused, “but not the entire cost of replacement”. That is an agency’s description, not a legal test.

“Actual damages” is a limit of its own: on its face it rules out a flat charge larger than what the work actually cost.

What a wrong deduction costs

The North Carolina Court of Appeals has read the remedies section, G.S. 42-55, as four distinct remedies, and held that the full-refund remedy is available only for a willful violation of G.S. 42-50:

We conclude that the full refund remedy is available only for willful violations of section 42-50, the only section of the Act containing provisions regarding deposit, bond, and notice vis a vis security deposits Neil v. Kuester Real Estate Servs., Inc., 237 N.C. App. 132, 764 S.E.2d 498 (2014)

On that reading, improper deductions, overcharging and charging for normal wear and tear are answered by an accounting and a refund of what was wrongly kept, plus damages and, if the noncompliance was willful, attorney’s fees. On that reading the whole deposit is at stake only for a willful failure of the trust-account, bond or notice requirements, which the trust account guide covers.

Its limits: the tenants complained of improper deductions (carpet cleaning, painting and a $40 administrative fee), not of a late or missing accounting, so, as we read it, the opinion’s reasoning covers a missed deadline but its facts do not. The appeal was from a refusal to certify a class action. And the court was applying the list of permitted uses as it stood before October 2012. We found no decision of the North Carolina Supreme Court construing the section.

A missed deadline is a separate question. The Real Estate Commission’s tenant brochure says that failing to make the accounting the Act requires forfeits the landlord’s right to keep any portion of the deposit, which is broader than the Court of Appeals’ reading. The deadline guide gives both.

The Tenant Security Deposit Act has no multiplier and no fixed penalty. Separately, renting residential housing is “commerce” under North Carolina’s unfair and deceptive practices statute, which trebles damages (G.S. 75-16). Tenants plead it beside deposit claims, and we found no appellate decision holding that a violation of the deposit Act is, or is not, enough by itself to support one.

Work out a North Carolina deposit return

The free North Carolina deposit tool asks what each deduction is for, in the list’s own categories, and tells you what the statute and the one appellate decision we found say about that kind of charge. It does not decide whether your charge fits an item: where the category you chose has none, it says so, and the amount stays in the arithmetic. It works out your 30-day deadline and generates a statute-cited return letter, all in your browser with nothing stored. How much you may collect in the first place is in the deposit limits guide.

North Carolina security deposit deductions: common questions

Is the list of North Carolina security deposit deductions exclusive?

Yes. G.S. 42-51(a) says security deposits "shall be permitted only for the following" and lists eight uses, and the North Carolina Court of Appeals has treated it as a closed list: it said the Act bars taking a charge that is not on the list out of the deposit, and does not itself stop a landlord billing such a charge separately (Neil v. Kuester Real Estate Services, 2014). Whether the tenant owes a charge like that at all depends on the lease and other law. (N.C. Gen. Stat. § 42-51(a))

Can a North Carolina landlord charge for carpet cleaning or painting?

The statute does not answer it directly, and we found no North Carolina appellate decision that does. Cleaning and painting are not on the list of permitted uses by name; "damage to the premises" is, and the landlord may not withhold for conditions due to normal wear and tear or keep more than actual damages. The statute does not define normal wear and tear. The Court of Appeals had carpet-cleaning and painting charges in front of it in 2014 and did not rule on them. The North Carolina Real Estate Commission’s tenant brochure says that costs for "routine cleaning and maintenance (painting, carpet cleaning, etc.)" ordinarily may not be deducted, and that cleaning a unit left so filthy that unusual or extraordinary measures are needed may be; that is the Commission’s reading, not a court’s. (N.C. Gen. Stat. §§ 42-51(a), 42-52)

What is considered normal wear and tear in North Carolina?

North Carolina does not define it. The Act gives no definition and no examples, and we found no North Carolina appellate decision that defines the phrase or applies it to particular facts. The Court of Appeals has said only that charging for normal wear and tear is a violation answered by a refund of what was wrongly kept, and that it has to be decided tenant by tenant (Neil v. Kuester Real Estate Services, 2014). The North Carolina Real Estate Commission’s tenant brochure says carpet, plumbing or appliances that need replacing because they are old and worn out cannot be charged; that is an agency’s description, not a legal test. (N.C. Gen. Stat. § 42-52)

Can a North Carolina landlord deduct unpaid utilities from a security deposit?

Only the ones the list covers. Item (1) covers costs for water or sewer service provided under G.S. 62-110(g) and electric service under G.S. 62-110(h), which are arrangements under which the landlord itself bills tenants for those services as the Utilities Commission allows. A bill the tenant owed a utility company directly is on the list only if it became a lien against the property because of the tenant’s occupancy (item 4). (N.C. Gen. Stat. § 42-51(a))

Can a North Carolina landlord keep the deposit for rent lost when a tenant leaves early?

The list includes damages from the nonfulfillment of the rental period, with three exceptions: a tenant who ended the agreement under G.S. 42-45 (military technicians under 10 U.S.C. 10216) or G.S. 42-45.1 (victims of domestic violence, sexual assault or stalking), a tenant forced to leave by the landlord’s violation of Article 2A, and a tenant constructively evicted by the landlord’s violation of G.S. 42-42(a). A servicemember who ends a lease under the federal Servicemembers Civil Relief Act is protected separately: that Act bars an early termination charge and makes it a crime to knowingly hold the deposit to cover rent accruing after a lawful termination (50 U.S.C. § 3955(e), (h)). The costs of re-renting after a breach by the tenant are a separate item. The amount kept may not exceed actual damages, and a landlord has a duty to mitigate: only the loss that reasonable diligence in re-letting would not have avoided is recoverable (Isbey v. Crews, 1981, a commercial lease in which the court stated the rule for leases generally). (N.C. Gen. Stat. §§ 42-51(a), 42-52)

Does a wrong deduction cost a North Carolina landlord the whole deposit?

Not on the North Carolina Court of Appeals’ reading. It read the remedies section as four distinct remedies and held that the full-refund remedy is available only for a willful violation of G.S. 42-50, the section on the trust account, the bond and the notice (Neil v. Kuester Real Estate Services, 2014). Improper deductions, overcharging and charging for normal wear and tear are answered by an accounting and a refund of what was wrongly kept, plus damages and, if the noncompliance was willful, attorney’s fees. Separately, North Carolina’s unfair and deceptive practices statute trebles damages, and we found no appellate decision holding that a violation of the deposit Act is, or is not, enough by itself to support a claim under it. (N.C. Gen. Stat. §§ 42-55, 75-16)

Sources

• N.C. Gen. Stat. § 42-51(a): the eight permitted uses
• N.C. Gen. Stat. § 42-52: normal wear and tear and actual damages
• N.C. Gen. Stat. § 42-55: the remedies section
• Neil v. Kuester Real Estate Servs., Inc., 237 N.C. App. 132, 764 S.E.2d 498 (2014) (N.C. Court of Appeals): the closed list and the four remedies
• N.C. Real Estate Commission, "Questions and Answers on: Tenant Security Deposits" (REC 3.24, 7/1/19) (agency brochure, not law): cleaning and wear
• N.C. Gen. Stat. §§ 75-1.1, 75-16: unfair and deceptive practices
• The North Carolina security deposit tool and full cited rules

About this page

Every quoted passage above comes from the same rules the North Carolina tool runs on, and the list of permitted uses is rendered from them. The statutes are on an automated weekly watch. Where a sentence gives our reading rather than the text, it says so, and where it relies on a court or on the Real Estate Commission, it names which. How we verify the law explains the process. This is general information that cites the law, not legal advice, and Orygn LLC is not a law firm. For advice about your situation, talk to a licensed North Carolina attorney.