Understanding Security Deposit Laws in
South Carolina and North Carolina: What You Need to Know

By: Kevin Raus – North Carolina, South Carolina Licensed Attorney with Brownlee Whitlow & Praet, PLLC

      In the world of renting, security deposits are a common practice that serve as a financial safeguard for housing providers while incentivizing residents to comply with their lease. However, the laws governing these deposits can vary significantly
from state to state. Today, we are diving into the specifics of security deposit laws in South Carolina and North Carolina, two neighboring states with some key differences in their approaches.

The Basics of Security Deposits

      Let’s briefly review what a security deposit is and why it matters.  South Carolina law defines a security deposit as, “a monetary deposit from the tenant to the landlord which is held in trust by the landlord to secure the full and faithful performance of the terms and conditions of the lease agreement.” While North Carolina does not have a statutory
definition for the term, for all intents and purposes, the term is viewed the same way. When the lease ends and the resident moves out, the housing provider is generally required to return this deposit, minus any legitimate deductions. The “which is held in trust” portion is significant because it is important to remember that the security deposit never becomes the housing provider’s money, and is always the resident’s money, unless and until the housing provider shows to the resident, in an itemized deduction, once the tenancy has concluded, that deductions from the deposit are justified.

South Carolina’s Security Deposit Laws

Limit
While South Carolina law does not explicitly limit the amount of a security deposit, it should nevertheless be reasonable and within industry standards.

The 30-Day Rule
In South Carolina, pursuant to SC Code Ann. § 27-40-410, housing providers are given a relatively short window to return a resident’s security deposit. By law, a housing provider must return the deposit within thirty (30) days after: (i) the resident’s tenancy has been terminated; (ii.) the resident has vacated; and (iii) the resident has demanded return of the security deposit, whichever is latest to occur. This quick turnaround time is designed to ensure that residents aren’t left waiting for extended periods to receive their money back.

Deductions and Itemization
While housing providers in South Carolina have the right to make deductions from the security deposit, they are prohibited from doing so arbitrarily. Allowable deductions include:

1. 1. Unpaid rent;
   2. Damages to the property that exceed normal wear and tear; and
   3. Other breaches of the lease agreement; including, “damages which the landlord has suffered by reason of the tenant’s noncompliance with [the terms of the lease].”

      Importantly, housing providers must provide residents with an itemized list of these deductions. This list should clearly state the reasons for each deduction and the corresponding amounts. This transparency helps prevent disputes and ensures that residents understand why they might not be receiving their full deposit.

Forwarding Address Requirement
An interesting aspect of South Carolina’s law is the provision regarding the resident’s forwarding address
(SC Code Ann § 27-40-410(a)). If a resident fails to provide a forwarding address to the housing provider, the housing
provider is only required to send the itemized statement and any remaining deposit to the resident’s last known address.
When this occurs, the housing provider is not liable for damages to the resident if the resident later tries to argue that the housing provider wrongfully withheld the security deposit. This underscores the importance for residents to ensure their housing providers have their updated contact information.

Penalties for Non-Compliance
South Carolina takes the timely return of security deposits seriously. If a housing provider fails to return the deposit
within the thirty-day period, they could face significant penalties under SC Code Ann § 27-40-410(b). The law allows
residents to potentially recover up to three times the amount wrongfully withheld, plus court costs and/or attorney’s fees.
This steep penalty serves as a strong deterrent against wrongfully withholding deposits. Uniquely, all three prerequisites
mentioned above (termination of tenancy, return of possession, and a demand for the return of the security deposit) must
be met before this is triggered.

North Carolina’s Security Deposit Laws

Limits
North Carolina law (specifically, NC Gen. Stat. § 42-51(b)) limits the amount a housing provider can charge for a security deposit. The limits are based on the length of the lease. For a week-to-week tenancy, the security deposit cannot exceed
two weeks’ rent. For a month-to-month tenancy, the maximum security deposit is one and a half months’ rent.  For leases longer than a month, the security deposit can be up to two months’ rent.

North Carolina Security Deposit Return Process
In North Carolina, housing providers must adhere to a timeline for returning security deposits, which may involve one or two steps depending on the circumstances:

1. 1.  Standard Requirement: Within thirty (30) days of termination of the tenancy and delivery of possession of the premises
      to the housing provider, the housing provider is required to provide an accounting of any deductions from the security deposit and return any refundable amount.
   2.  Extended Timeline (Optional): If the full extent of the housing provider’s deductions cannot be determined within the initial 30-day period, the housing provider must issue an interim accounting within the original 30 days. The final accounting and any remaining refund are then due no later than sixty (60) days after the resident vacates the property.

      The extended timeline offers additional flexibility for housing providers in cases where assessing damages or finalizing accounts might require more time. However, interim accounting remains mandatory within the initial 30-day period.

Deductions and Itemization
Pursuant to NC Gen. Stat. § 42-51(a), North Carolina housing providers are only allowed to make deductions from the
security deposit for:

1. 1. Unpaid rent, water, sewer, or electric bills,
   2. Damage to the property, including broken or destroyed smoke or carbon monoxide alarms,
   3. Damages caused by breaking the lease early, unless the resident had a legal reason to do so, such as the housing provider violating the law or making the property unlivable,
   4. Any unpaid bills that become a lien on the property because of the resident,
   5. Costs of finding a new resident after the original tenant breaks the lease, including any fees paid to a real estate agent,
   6. Costs of removing and storing the resident’s belongings after an eviction,
   7. Court costs, or
   8. Any fee permitted by N.C. Gen. Stat § 42-46 (which includes a component of attorney fees).

The requirement for an itemized list of deductions is also present in North Carolina law. At a minimum, the housing provider must provide an interim accounting statement to the resident within the initial 30-day period, even if the full deposit return
and full itemization of deductions take up to 60 days to complete.

Penalties for Non-Compliance
While North Carolina’s penalties for non-compliance are not as severe as South Carolina’s, they are still significant. If a
housing provider fails to return the deposit within the specified time frame, they may lose the right to assess the deposit for damages. However, the resident would still remain responsible for any damages incurred. This provision serves as a strong incentive for housing providers to comply with the law.

Implications for Residents and Housing providers
Understanding the laws controlling security deposits in your respective state is crucial for both residents and housing
providers.  For housing providers, compliance with these laws is essential to avoid potentially costly penalties. 
Best practices include:

1. 1. Keeping detailed records of the property’s condition;
   2. Promptly assessing any damages after a resident moves out;
   3. Providing clear, itemized lists of any deductions; and
   4. Returning deposits (or remaining balances) within the legally mandated timeframes.

The Importance of Communication
While these laws provide a framework for handling security deposits, open communication between housing providers and residents can often prevent disputes from arising in the first place. Residents should feel comfortable asking about the return process before they move out, and housing providers should be transparent about their assessment procedures.

Conclusion
The security deposit laws in South Carolina and North Carolina, while similar in many respects, have some key differences that both residents and housing providers need to be aware of. The stricter timeline and potentially higher penalties in South Carolina contrast with the more flexible but still regulated approach in North Carolina. Regardless of which state you’re in, the underlying principles remain the same: security deposits should be handled fairly, transparently, and in accordance with the
law.  By understanding these regulations, both residents and housing providers can ensure a smoother rental experience and avoid potential legal pitfalls.

     
*The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information in this article is for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. Viewers of this material should contact their attorney to obtain advice with respect to any particular legal matter. No viewer of this material should act or refrain from acting on the basis of information in this presentation without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.  Use of, and access to, this article does not create an attorney-client relationship between the reader and Brownlee Whitlow & Praet, PLLC or any contributing law firms. All liability with respect to actions taken or not taken based on the contents of this article are hereby expressly disclaimed.