Published 2026-09-27 · 10 min read

New Mexico Security Deposit Law 2026: Limits, Deadlines & Deductions

New Mexico's security deposit rules live in one section of the Uniform Owner-Resident Relations Act: NMSA § 47-8-18. The cap turns on lease length — one month's rent is the ceiling on any rental agreement shorter than a year, while an annual agreement may carry a reasonable deposit, with annual interest owed when that deposit exceeds one month's rent. At the end of the residency you get 30 days to send an itemized written list of deductions and the balance. Miss that statement and the sanction is not a multiplier: you forfeit the right to withhold any portion of the deposit, the right to counterclaim, and the right to an independent damage action, and you owe the resident's court costs and reasonable attorney's fees (§ 47-8-18(D)). Retain a deposit in bad faith and a separate $250 civil penalty applies (§ 47-8-18(E)).

The short version: Under a year: never demand or receive more than one month's rent as a deposit (§ 47-8-18(A)(2)). Annual agreement: the deposit must be reasonable, and if it exceeds one month's rent you owe interest annually at the passbook rate in § 47-8-18(A)(1). Prepaid last month's rent sits outside this section (§ 47-8-18(B)). At the end, apply the deposit only to rent and to damages from noncompliance with the rental agreement or § 47-8-22 — never to normal wear and tear — and, if you retain any portion, mail the itemized list and balance to the resident's last known address within 30 days of the later of agreement termination or resident departure (§ 47-8-18(C)).

What the earlier version of this page got wrong: Three claims were materially wrong or overstated, and one whole subsection was missing. (1) The $250 bad-faith civil penalty in § 47-8-18(E) was omitted entirely — the old page described forfeiture as the only sanction. (2) The interest base was narrowed without support: the old page said interest is owed only on the portion exceeding one month's rent, but § 47-8-18(A)(1) requires annual interest at the stated passbook rate on such deposit once an annual-lease deposit exceeds one month's rent; the excess-only limitation is not in the text. (3) The old page twice relied on a "however denominated" cap clause — that phrase does not appear in § 47-8-18; what reaches relabeled money is the § 47-8-3 definition of a deposit as money delivered as a pledge to abide by the rental agreement. Also filled in below, all previously omitted: the § 47-8-18(B) prepaid-rent rule, the wear-and-tear bar and its § 47-8-3 definition, last-known-address mailing compliance, the § 47-8-22 cross-reference, the § 47-8-9 exemptions, the § 47-8-16 no-waiver rule, and § 47-8-21 successor liability.

New Mexico's 30-day statement deadline is unforgiving — miss it and you forfeit the deposit, the counterclaim, and the independent damage action, and pay the resident's costs and fees. The Security Deposit Disposition & Deadline Tracker ($14.95) keeps your return deadlines, itemized deductions, and mailing dates in one spreadsheet so the clock never sneaks up on you.

The statute table

Limits: how much can you charge?

The ceiling depends on the term the parties actually agreed to:

• Under one year — one month's rent, hard cap. Under § 47-8-18(A)(2) the owner shall not demand or receive a deposit in excess of one month's rent. At $1,200 a month, the most you may take is $1,200 — "demand or receive" means an over-cap deposit you merely accepted is already a violation.
• Annual agreement — reasonable, with an interest trigger. Section 47-8-18(A) permits a reasonable deposit, and (A)(1) attaches the interest duty the moment an annual-lease deposit exceeds one month's rent. No dollar ceiling is stated for the annual term.
• What counts is the § 47-8-3 definition, not the label on the check: a deposit is an amount of currency or an instrument delivered to the owner as a pledge to abide by the terms and conditions of the rental agreement. Money taken as that kind of pledge is a deposit under the Act; splitting it across two names does not change its substance.
• Prepaid last month's rent is separate. Section 47-8-18(B) says the section is not intended to include last month's prepaid rent the rental agreement requires, and a deposit described in (A)(1) is not to be construed as prepaid rent. Keep the buckets distinct: prepaid rent is rent paid early; the deposit is the pledge.

Check your figure against the Security Deposit Max Checker before you quote it to an applicant.

The 30-day deadline, precisely

On termination of the residency, money held as a deposit may be applied to the purposes in the next section. Then, in the event actual cause exists for retaining any portion of the deposit, the owner must provide the resident with an itemized written list of the deductions and the balance of the deposit, if any, within 30 days of the date in the clocks section below. Section 47-8-18(C) also supplies the delivery rule summaries usually miss: the owner is deemed to have complied by mailing the statement and any payment required to the last known address of the resident. Keep the mailing receipt — the mailing is the compliance, so its proof is the record that matters. Find your cutoff with the Security Deposit Deadline Finder.

When the clocks actually start

New Mexico's text runs the statement duty and the forfeiture sanction off two differently worded start points, and conflating them is how deadlines get missed:

• The itemization clock (§ 47-8-18(C)): 30 days from termination of the rental agreement or resident departure, whichever is later.
• The forfeiture clock (§ 47-8-18(D)): measured against 30 days of the termination of the tenancy. The subsections do not use identical words — diary the earlier of the two readings as your deadline.
• The interest clock (§ 47-8-18(A)(1)): interest on a qualifying annual-lease deposit is payable annually, with no demand requirement or grace period stated.
• No forwarding-address clock exists in § 47-8-18. Nothing makes a forwarding address a condition of the return, and there is no unclaimed-deposit period in this section. The substitute protection is the last-known-address mailing rule in (C).

A worked example

Rent is $1,200 a month under a ten-month agreement, and you hold a $1,200 deposit — exactly at the § 47-8-18(A)(2) cap. The agreement terminates and the resident departs on the same day, Monday, March 2, 2026.

• The itemized list and the balance are due within 30 days of that later date: Wednesday, April 1, 2026.
• Your lawful deductions total $450: unpaid utilities and documented damage from noncompliance, each itemized. The balance due is $750.
• Mail the list and the $750 to the resident's last known address on or before April 1: you have complied, and the mailing itself is deemed compliance under § 47-8-18(C).
• Send nothing by April 1 and the penalty section takes over — the $450 in real charges does not survive a missing statement.

Deductions and the itemized list

Section 47-8-18(C) allows the deposit to be applied to exactly the claims the section names:

• Rent owed under the rental agreement.
• Damages the owner suffered by reason of the resident's noncompliance with the rental agreement or with § 47-8-22 — the resident-obligations section (keeping the unit clean and safe, disposing of waste, using facilities reasonably, not deliberately or negligently damaging the premises).
• The section's closing sentence confirms the practical categories: nothing in it precludes retaining portions of the deposit for nonpayment of rent or utilities, repair work, or other legitimate damages.

One express exclusion controls the damage claims: no deposit shall be retained to cover normal wear and tear. Section 47-8-3 defines that term as deterioration from the use the unit is intended for, without negligence, carelessness, accident, abuse, or intentional damage — and adds that uncleanliness does not constitute normal wear and tear. Ordinary scuffing from intended use is not deductible; a unit left unclean is not shielded by the label either. When actual cause exists to retain any portion, the list must be written and itemized. Build the letter with the Security Deposit Deduction Letter Generator.

Move-out compliance checklist

1. Classify the term before you price the deposit. Under one year, stop at one month's rent (§ 47-8-18(A)(2)); annual, keep it reasonable and diary the (A)(1) interest duty if it exceeds one month's rent.

2. Ledger the deposit as a § 47-8-3 pledge, separately from prepaid last month's rent (§ 47-8-18(B)). Money that is a pledge in substance counts as a deposit whatever the ledger calls it.

3. Log both end dates the day they happen — agreement termination and resident departure. The (C) clock runs from the later; diary the earlier-reading date because (D) is worded from termination of the tenancy.

4. Inspect at once and sort every charge into rent, utilities, repair work, or other legitimate damages from noncompliance with the agreement or § 47-8-22 — and strike anything that is normal wear and tear under § 47-8-3 first.

5. Itemize in writing, line by line, with the amount for each deduction and the balance, if any. If you retain nothing, return the full deposit and keep the record.

6. Mail the statement and any payment to the resident's last known address by day 30 and keep the mailing receipt; § 47-8-18(C) deems that mailing compliance.

7. If you sell or assign, hand the successor the deposit records. Section 47-8-18 has no transfer paragraph; § 47-8-21(A) makes the successor liable for all Act and agreement obligations, so an undocumented transfer keeps the liability and loses the paperwork.

Interest and where the money sits

New Mexico has no separate-account, escrow, or commingling rule in § 47-8-18, and no receipt requirement at collection. The one holding-related duty is interest, narrow in one direction and broader than summaries suggest in the other:

• Trigger: an annual rental agreement, and a deposit greater than one month's rent (§ 47-8-18(A)(1)). A sub-year deposit can never trigger it, because the (A)(2) cap keeps it at or below one month's rent.
• Rate: interest equal to the passbook interest permitted to savings and loan associations in this state by the Federal Home Loan Bank Board — the historical passbook benchmark named in the statute.
• Base and timing: the owner shall pay the resident annually that interest on such deposit. Once the annual-lease deposit crosses one month's rent, the duty attaches to the deposit and payment is annual. Do not assume an excess-only base the section never states.
• Worked figure: at $1,200 a month on an annual agreement with an $1,800 deposit, the duty is live because $1,800 exceeds one month's rent. At an illustrative 1 percent passbook rate, the annual payment on the deposit as the section words it is $18 — small money, but a statutory duty owed every year the qualifying deposit is held.

Run your own rate through the Security Deposit Interest Calculator.

The penalty, spelled out

Section 47-8-18 runs two separate sanctions, for two different failures:

• Missing the statement — total forfeiture (§ 47-8-18(D)). Fail to provide the written statement of deductions and the balance shown to be due within 30 days of termination of the tenancy, and the owner: (1) forfeits the right to withhold any portion of the deposit; (2) forfeits the right to assert any counterclaim in an action brought to recover the deposit; (3) is liable for court costs and reasonable attorney's fees; and (4) forfeits the right to assert an independent action against the resident for damages to the rental property. On the worked example, the $450 of genuine charges is lost with everything else: the whole $1,200 must be accounted for to the resident, and the damage claim cannot be revived as a counterclaim or a separate suit. This sanction needs no bad faith — it turns on the missing or late statement.
• Bad-faith retention — $250 (§ 47-8-18(E)). An owner who in bad faith retains a deposit in violation of the section is liable for a civil penalty of $250 payable to the resident — a fixed measure, $250 whether the amount wrongfully kept was $200 or the full $1,200. It sits alongside the return of what is owed, not in place of it.
• No waiver shortcut (§ 47-8-16). A rental agreement provision purporting to waive rights or remedies under the Act is prohibited — a lease clause shortening the 30 days does not protect you.

FAQ

Does the 30-day clock start at move-out or at lease end?

For the itemization duty, § 47-8-18(C) runs it from termination of the rental agreement or resident departure, whichever is later. The forfeiture subsection, § 47-8-18(D), is worded from termination of the tenancy. Diary the earlier date the two readings produce.

Can I charge a nonrefundable cleaning fee on top of a full one-month deposit?

Section 47-8-18 contains no "however denominated" clause and no separate fee category. A deposit is money delivered as a pledge to abide by the rental agreement (§ 47-8-3); on a sub-year agreement the owner shall not demand or receive such a deposit over one month's rent (§ 47-8-18(A)(2)). A charge that is in substance pledge money counts toward that cap whatever it is called.

Do I owe interest on a deposit of exactly one month's rent?

No. The § 47-8-18(A)(1) duty attaches only under an annual rental agreement where the deposit is greater than one month's rent, payable annually at the passbook rate the section names, on such deposit. At or below one month's rent — every lawful sub-year deposit — no interest duty arises under this section.

Must the deposit sit in a separate bank account, and must I give a receipt?

Section 47-8-18 imposes neither requirement: no escrow, segregation, or account rule, and no receipt duty at collection. Its paperwork duties are the itemized statement and balance at the end of the residency.

What if the resident leaves no forwarding address?

Section 47-8-18 has no forwarding-address condition and no unclaimed-deposit rule. Mail the statement and any payment to the resident's last known address — § 47-8-18(C) deems the owner to have complied by doing exactly that — and keep the receipt.

Can the resident still recover if I had real damages but sent the statement late?

Yes. Under § 47-8-18(D) a late or missing statement forfeits the right to withhold any portion, the right to counterclaim, and the right to an independent damage action, with court costs and reasonable attorney's fees owed. Bad-faith retention separately carries the $250 penalty in § 47-8-18(E).

I am buying a rental with a sitting resident. Who owes the deposit accounting?

Section 47-8-18 states no transfer rule of its own. Under § 47-8-21(A), on termination of the owner's interest — sale and assignment included — the successor in interest is liable for all obligations under the rental agreement and the Act. Document the deposit amount, lease term, and any accrued (A)(1) interest at closing.

Are any rentals outside these rules?

Section 47-8-9 exempts listed arrangements unless created to avoid the Act: institutional residence incidental to detention or services, contract-of-sale occupancy, fraternal or social organization occupancy, transient hotel or motel occupancy, employee occupancy conditional on employment under a written agreement, and primarily agricultural premises. Otherwise § 47-8-8 applies the Act to New Mexico dwelling-unit rental agreements.

Read the statute yourself

Primary sources:

• NM OneSource (New Mexico Compilation Commission) — the official compilation portal for the NMSA 1978.
• NMSA § 47-8-18, unannotated Chapter 47 text — the official-host full chapter text; § 47-8-18 and the § 47-8-3 definitions are in the same document.
• NMSA § 47-8-18 (Justia) — the deposits section: cap, interest, itemization, forfeiture, $250 penalty.
• NMSA § 47-8-3 (Justia) — the Act's definitions, including "deposit" and "normal wear and tear."

The deposit is only one piece of New Mexico compliance. Our full New Mexico landlord-tenant law guide covers the rest of the relationship — the SB 267 application and fee stack, rent and late fees under § 47-8-15, owner duties and disclosures, habitability remedies including termination and abatement, entry, and the § 47-8-33 breach and § 47-8-37 termination rules.

More security deposit guides

• Security deposit laws by state
• New Jersey security deposit law
• New York security deposit law
• New Hampshire security deposit law
• North Carolina security deposit law

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