Published 2026-09-27 · 8 min read

Minnesota Security Deposit Law 2026: Limits, Deadlines & Deductions

Minnesota sets no maximum security deposit, but it gives tenants a short return clock, mandatory interest, and a penalty structure in a single section: Minn. Stat. § 504B.178. The normal deadline is three weeks after the tenancy terminates, the deposit earns simple interest at 1% per year, and a landlord who misses the statement deadline — or fails the related transfer and inspection duties — owes a penalty equal to the amount withheld, on top of returning it. Bad-faith retention can add up to $500 per deposit.

The short version: Charge what the market will bear — there is no cap — but calendar the end of the tenancy on day one. After you receive the tenant's mailing address or delivery instructions, return the deposit with interest or send a written statement giving the specific reason for each amount withheld, within three weeks (five days in a qualifying condemnation case). Withhold only what is reasonably necessary for unpaid rent or other funds due under the agreement, or to restore the unit to its condition at the start of the tenancy, ordinary wear and tear excepted. Mailing the deposit or statement first class, correctly addressed, within the window counts as compliance.

Corrections to the earlier version of this page: The old page put the return duty in subdivision 2 — it is subdivision 3; interest is subdivision 2. It also claimed Minnesota has required, since 2015, a statement listing specific repairs with written evidence of cost — § 504B.178 requires a written statement showing the specific reason for withholding, not that repair-and-evidence package, so that claim is removed. It omitted several rules that change outcomes: first-class mailing counts as timely compliance, the landlord carries the burden of proof on every amount withheld, failing the § 504B.182 inspection notice/duty is now itself a damages trigger under subdivision 4, the successor-in-interest 20-day objection rule in subdivision 6, and the exceptions and tenant penalty inside subdivision 8 on last-month withholding.

Minnesota's clock is only three weeks, and it runs from termination plus receipt of the tenant's address — not from when your repairs finish. The Security Deposit Disposition & Deadline Tracker keeps your deposit register, deduction ledger, and deadlines in one formula-driven tracker ($14.95, one-time purchase).

The statute table

Limits: how much can you charge?

There is no statutory cap. You may ask for two months' rent and still be within § 504B.178. That does not make a high deposit wise: it raises your interest obligation, increases the amount exposed to the subdivision 4 penalty if your statement is late, and makes a listing harder to fill. Most Minnesota landlords stay near one month's rent for market reasons, not legal ones. Check a proposed amount with the Security Deposit Max Checker — in Minnesota the checker is really a penalty-exposure check.

The deadlines, precisely

• Three weeks after termination: return the deposit with interest, or furnish the written statement, under subdivision 3(a)(1).
• Five days after the tenant leaves due to legal condemnation: the same duty, compressed, under subdivision 3(a)(2) — only where the condemnation was not due to the tenant's willful, malicious, or irresponsible conduct.
• 60 days after your interest in the premises ends: transfer or return the deposit under subdivision 5, measured from termination of your interest or from when the successor must account for the deposit, whichever comes first.
• 20 days after a successor's written notice of the amount transferred or assumed: the tenant's window to object under subdivision 6; silence limits the successor to the noticed amount.
• Two weeks after a recovery action starts: returning the deposit inside this window defeats the bad-faith presumption in subdivision 7 — it is a cure window, not a deadline to plan around.

When the clocks actually start

The three-week and five-day duties are framed as acting within the period and after receipt of the tenant's mailing address or delivery instructions. That sequence matters: document when you received the address, because the damages provision in subdivision 4 is also measured after that receipt. Interest has its own start rule — it runs from the first day of the next month after the deposit was fully paid, to the last day of the month in which you in good faith comply with subdivision 3, or to the date judgment is entered, whichever is earlier. Mailing counts: putting the deposit or statement in first-class mail, postage prepaid, in a properly addressed envelope with a proper return address, within the window is sufficient compliance under subdivision 3(b) — keep the mailing proof.

A worked example

Rent is $1,200 a month and the deposit is $1,200 (one month — a market choice, not a cap). The tenancy terminates on Monday, March 2, 2026, and the tenant gives you a forwarding address that day.

• The return-or-statement deadline is Monday, March 23, 2026 (three weeks).
• Your charges are $450: $300 of unpaid rent and $150 to repair damage beyond ordinary wear and tear. The balance is $750, plus interest. If the deposit had been held for a full year, the simple 1% interest on $1,200 would be about $12 — use the exact month-count rule in subdivision 2 for a real file, and remember interest under $1 is excluded.
• You mail the $750 plus interest and the written statement, first class and correctly addressed, on or before March 23: you have complied, even if delivery lands later.

Find your exact cutoff with the Security Deposit Deadline Finder.

Deductions and the written statement

Subdivision 3(b) allows withholding only amounts reasonably necessary for two purposes:

1. To remedy a default in payment — unpaid rent, or other funds due to you under an agreement (for example, a lease obligation for the tenant to reimburse a utility you paid).

2. To restore the premises to their condition at the commencement of the tenancy, ordinary wear and tear excepted.

Nothing else qualifies. A lease clause that tries to forfeit the whole deposit for a non-monetary breach, or to expand these grounds, runs into both this closed list and subdivision 10's bar on waiver. The written statement must show the specific reason for withholding the deposit or any part of it — name the unpaid item or the specific damage, and tie the amount to it. In a dispute, subdivision 3(c) puts the burden on you to prove, by a fair preponderance of the evidence, the reason for every amount kept — so invoices, photos, the move-in record, and the ledger are not paperwork for its own sake; they are your burden of proof. Generate the letter with the Security Deposit Deduction Letter Generator.

Move-in to move-out compliance checklist

1. Record the deposit and its full-payment date. Interest runs from the first day of the next month after full payment (subd. 2) — you cannot compute it later without that date.

2. Do not try to contract around the section. Any attempted waiver is void (subd. 10); remove forfeiture and expanded-deduction clauses from your lease.

3. Handle the § 504B.182 inspections properly. Failing to give the required inspection notices, or to complete an initial or move-out inspection the tenant requested, is now a subdivision 4 damages trigger in its own right.

4. Get the forwarding address or delivery instructions in writing at move-out, and log the date you received them — the return duty and the damages measure both key off that receipt.

5. Inspect, photograph, and price each charge against the two lawful grounds only (subd. 3(b)), separating ordinary wear and tear before you draft anything.

6. Return or state, in writing, within three weeks — five days in a qualifying condemnation case — stating the specific reason for each amount withheld, with interest added (subd. 3(a)).

7. Mail it provably. First-class mail, postage prepaid, correct address, proper return address, inside the window is sufficient compliance (subd. 3(b)) — keep a certificate of mailing.

Interest and where the money sits

• Rate and method: simple, noncompounded interest at 1% per annum (subd. 2). The rate was 3% until August 1, 2003.
• Period: from the first day of the next month following full payment of the deposit, to the last day of the month in which you in good faith comply with subdivision 3, or to judgment, whichever is earlier.
• De minimis rule: an interest amount of less than $1 is excluded.
• Where it sits: the section says the deposit is held by the landlord for the tenant and is not received in a fiduciary capacity for the cited licensing purpose; it imposes no separate-account or escrow requirement. That silence does not reduce the interest duty or the return duty. Run the numbers with the Security Deposit Interest Calculator.

The penalty, spelled out

Keep the three sanctions separate — they stack, and they are triggered differently:

• Subdivision 4 penalty (deadline/transfer/inspection failures): fail to provide the written statement in three weeks (or five days in the condemnation case), fail to transfer or return as subdivision 5 requires, or fail the § 504B.182 inspection notice/duty — in each case after receiving the tenant's address or instructions — and you are liable for damages equal to the portion withheld plus its interest, as a penalty, in addition to returning the portion wrongfully withheld plus its interest. On the worked example, if the $450 was wrongfully withheld and the statement never went out, that is the $450 back (plus interest) plus a $450 penalty (plus interest on it) — before bad faith is even considered.
• Bad faith (subd. 7): retention in bad faith adds punitive damages of up to $500 per deposit on top of subdivision 4. If you failed subdivision 3 or 5, retention is presumed to be in bad faith unless you return the deposit within two weeks after an action for its recovery starts.
• Tenant-side withholding (subd. 8): a tenant generally may not hold back last-period rent on the theory the deposit covers it. Note the exceptions the old page flattened: an oral or written month-to-month agreement where neither side has served a notice to quit, and the last month of a contract-for-deed cancellation period or a mortgage foreclosure redemption period. Withholding creates a rebuttable presumption it was done on deposit grounds; a tenant who stays in violation after written demand and notice of the subdivision can owe a penalty tied to the non-rent amounts you were entitled to withhold, plus interest on the whole deposit.

A sale does not end the problem, either. Under subdivision 5 you must, within the 60-day measure, either transfer the remainder (after lawful deductions, with interest) to your successor and then notify the tenant of the transfer and the transferee's name and address, or return it to the tenant. Under subdivision 6 the successor steps into your deposit duties — subject to that 20-day objection limit on the noticed amount, with the notice containing a stamped envelope addressed to the successor.

FAQ

Is there really no cap on a Minnesota security deposit?

Correct — § 504B.178 sets no maximum amount. The discipline is market pricing plus your own exposure: the larger the deposit, the larger the interest and the subdivision 4 penalty base if your statement is late.

How long do I have to return the deposit in Minnesota?

Three weeks after termination of the tenancy, and after you receive the tenant's mailing address or delivery instructions — return the deposit with interest or furnish a written statement of the specific reason for withholding (subd. 3(a)). A qualifying condemnation shortens that to five days after the tenant leaves.

Does mailing on the last day count, or must it arrive by then?

Mailing counts. Subdivision 3(b) makes it sufficient compliance to place the deposit or statement in first-class mail, postage prepaid, correctly addressed with a proper return address, within the required time.

What must the written statement contain?

The specific reason for withholding the deposit or any portion of it (subd. 3(a)). Name each unpaid item or specific damage and its amount — and keep the records, because subdivision 3(c) puts the burden of proving each reason, by a fair preponderance, on you.

Do I owe interest on a short tenancy?

The interest rule has no minimum-tenancy exception: it runs from the first day of the next month after full payment until the statutory end point, at 1% simple. The only carve-out is that an interest amount under $1 is excluded (subd. 2).

Can the tenant use the deposit as the last month's rent?

Generally no (subd. 8) — but read the exceptions first: month-to-month agreements with no notice to quit served by either side, and the last month of a contract-for-deed cancellation or foreclosure redemption period, are treated differently. A tenant who remains in violation after written demand can owe the subdivision 8 penalty plus interest on the whole deposit.

What happens if I sell the building mid-tenancy?

Within 60 days of your interest terminating (or when the successor must account for the deposit, whichever is first), transfer the remainder with interest to the successor and notify the tenant of the transferee's name and address, or return it to the tenant (subd. 5). The successor then holds your deposit duties, limited to the noticed amount if the tenant does not object within 20 days (subd. 6).

Where can a tenant sue, and can my lease waive any of this?

An action, including in conciliation court, may be brought in the county where the property is located or, at the tenant's option, where you reside (subd. 9). And no — any attempted waiver of the section, by contract or otherwise, is void and unenforceable (subd. 10).

Read the statute yourself

Everything here traces back to one section, Minn. Stat. § 504B.178. If anything is disputed, the primary sources control:

• Minn. Stat. § 504B.178 (Minnesota Revisor of Statutes, official) — the official current text, including the subdivision 4 inspection trigger and the subdivision 8 exceptions.
• Minn. Stat. § 504B.178 (Justia) — the same section on Justia.
• Minn. Stat. § 504B.178 (Cornell LII) — the same section in Cornell's code.

More security deposit guides

• Security deposit laws by state
• Michigan security deposit law
• Mississippi security deposit law
• Wisconsin security deposit law
• Iowa security deposit law

Last verified: October 15, 2026. This is general information, not legal advice. Verify with a licensed Minnesota attorney before acting.