What Are Permitted Uses of the Security Deposit by a Landlord/Agent?
North Carolina law strictly defines what a landlord or property manager may deduct from a tenant’s security deposit.
These rules help ensure fairness for both parties and protect owners from legal risk. Understanding these permitted uses is essential for making accurate, lawful decisions during turnover.
Here's what owners need to know.
Frequently Asked Questions
Can I charge a tenant for normal wear and tear?
No. Wear and tear cannot legally be deducted.
Can I charge for unpaid rent?
Absolutely. This is one of the primary permitted uses.
Can I deduct for repainting or flooring repairs due to damage?
Yes, if damage exceeds normal wear and tear, but depreciation applies.
Can I deduct for missed utility bills?
Yes, if the lease makes the tenant responsible, and documentation exists showing the unpaid amount.
Permitted Uses of the Security Deposit Under NC Law
North Carolina General Statute § 42-51 outlines exactly what security deposits can be applied toward. MoveZen follows this list strictly.
1. Unpaid Rent, Late Fees, and Water/Sewer/Electric Charges
Deposits may be applied to unpaid base rent, late fees permitted under the lease, and unpaid water, sewer, or electric charges where the tenant was responsible. Rent-related deductions are among the most common and are fully allowable under the statute.
2. Damage Beyond Normal Wear and Tear
Owners may deduct for physical damage that exceeds what results from ordinary use. Common examples include holes larger than picture hooks, broken doors or hardware, pet-caused carpet damage, excessive stains or burns, broken blinds, and water damage caused by tenant negligence. Depreciation applies to items that were already aged at move-in.
"Normal wear and tear" — minor scuffs, small nail holes, gradual carpet wear — is not deductible.
3. Damages from Nonfulfillment of the Rental Period
If a tenant vacates before the end of their lease term, losses resulting from that early departure are deductible. This does not apply if the tenant terminated under G.S. 42-45 (military deployment), G.S. 42-45.1 (domestic violence, sexual assault, stalking), or because the landlord's violation of Article 2A or G.S. 42-42(a) made the property uninhabitable or constituted constructive eviction.
4. Unpaid Bills That Become a Lien Against the Property
If a tenant's unpaid bills — utilities or otherwise — became or could become a lien against the property during their occupancy, those amounts are deductible. Documentation of the unpaid balance is required.
5. Costs of Re-Renting After Tenant Breach
If a tenant breached the lease and the unit had to be re-rented, reasonable costs of doing so are deductible.
6. Costs of Removing and Storing Abandoned Property
If a tenant left belongings behind after a summary ejectment proceeding, reasonable removal and storage costs are deductible.
7. Court Costs
Court costs incurred in connection with the tenancy are a permitted use.
8. Fees Permitted Under G.S. § 42-46
G.S. § 42-46 authorizes several specific fees that may be deducted from the deposit.
Late fees. Chargeable only if rent is five or more calendar days past due. Capped at $15 or 5% of monthly rent, whichever is greater. One fee per late payment only.
Administrative fees. Depending on the stage of a legal proceeding, landlords may charge a complaint-filing fee, court-appearance fee, or second trial fee — each with specific eligibility requirements and caps tied to a percentage of monthly rent. Only one of these fees may be charged per proceeding, and any fee not expressly authorized by the statute is void and unenforceable.
Out-of-pocket litigation costs. Actual court filing fees, process service costs, and reasonable attorneys' fees (where the landlord prevails) may also be recovered, subject to statutory caps.
What You Cannot Charge the Deposit For
This is equally important.
- Normal wear and tear
- Upgrades or improvements unrelated to damage
- Full replacement cost of already-depreciated items
- Cosmetic enhancements
- Damage caused by deferred maintenance or owner failure to repair
- Any charge not tied to one of the eight categories above
Charging for these can result in disputes or legal issues.
A Note on Lease Violations
A lease violation is not an independent basis for a security deposit deduction under NC law. The opening language of G.S. § 42-51 is explicit: deposits "shall be permitted only for the following," and no general lease violation category appears on that list.
This was reinforced by the NC Court of Appeals in Neil v. Kuester Real Estate Services, Inc., where the court applied § 42-51 strictly and confirmed that charges falling outside its permitted uses expose landlords to tenant remedies, including proper accounting, damages, and attorney's fees.
In practice, a lease violation may explain what happened, but the deduction still has to tie to a specific, documentable cost within one of the eight permitted uses.
Unauthorized pets, smoking, or failure to maintain the property may support a charge, but only because they caused damage to the premises or required cleaning. The violation is the story. The damage or cost is the legal basis.
The MoveZen Deposit Accounting Process
Deposit accounting is one of the most legally sensitive parts of the turnover process. MoveZen handles compliance with NC deposit law, correct application of depreciation, accurate categorization of damage versus wear, proper documentation, and accounting within the statutory deadline.
We understand that owners may not always agree with our assessment of the charges. If that's the case, we will send you everything you need to finalize the deposit directly with the tenant, including all documentation, itemized charges, and the legally required timeframe under NC law to complete the accounting.