Tennessee Security Deposit Law (Ultimate Landlord Guide)

As a Tennessee landlord, it’s always best to insure yourself against certain liabilities by requiring tenants’ security deposits. A security deposit can help cover the following:

• Missed rent payments after a tenant breaks their lease early without a legally justifiable reason.
• Lost rental income after a tenant chooses to abandon the unit for whatever reason.
• Cover for unpaid utility bills after a tenant moves out.
• Cover the cost of cleaning the property if the unit requires excessive cleaning.
• Cover the cost of damage exceeding normal wear and tear.

The right to keep tenants’ security deposits isn’t without some responsibilities, though. You must abide by all relevant state and local security deposit laws. In this article by Collaborate Real Estate Group LLC - Memphis, we’ll walk you through everything to know in this regard.

Tennessee’s Security Deposit Laws

Maximum Security Deposit Law

As of July 2024, Tennessee landlords cannot charge more than one month’s rent as the security deposit.

Before this change, there was no limit on what landlords could charge, although common practices advised reasonableness.

Additional Pet Deposits

Tennessee landlords can charge additional pet deposits in addition to the move-in security deposit. There are no specific statutory limits on pet deposits or fees in Tennessee. Landlords may charge additional amounts for pets as long as the terms are clearly stated in the lease agreement.

Tennessee law doesn’t specify whether pet deposits must be refundable. This means both refundable deposits and non-refundable pet fees are generally legal, as long as the lease clearly states their terms.

Pet rent (a monthly charge for having a pet) is also allowed in Tennessee. There are no caps or special state regulations. There is a caveat, though; you must exempt tenants with companion animals.

Service dogs and emotional support animals are protected under the Fair Housing Act in Tennessee. Service dogs also have extra protection under the Americans with Disabilities Act (ADA).

Service animals and emotional support animals (ESAs) are protected under federal law and must not be subject to pet deposits or fees. Landlords are allowed to charge for damages caused by these animals, but cannot impose additional deposits based solely on their presence.

Aside from making this exemption, you may also need to provide the tenant with other accommodations. Including:

• Making their unit disabled-friendly. For instance, by installing ramps for wheelchair access and grab bars in the bathroom.
• Ensuring the parking is accessible.
• Adjusting the rent payment schedule to match the time when the tenant gets their disability benefits.

Holding of Tenant’s Security Deposits

In Tennessee, Landlords are required to keep security deposits in a dedicated bank account—used exclusively for that purpose—within a state or federally regulated financial institution. You must not commingle the deposit with your funds.

You must also inform the tenant of the institution’s name and location, but you are not required to provide the account number. Tennessee law does not require interest to be paid on security deposits.

Sale of Rental Property

After selling the rental property to a buyer, you must ensure the transaction respects the tenant’s right to their deposited funds.

Specifically, you must transfer the deposit to the incoming landlord, less any allowable deductions. After doing this, you must then notify the tenant of the transfer. Including the amount transferred, date of transfer, and the new landlords’ address.

Security Deposit Deductions

Just like with other states, Tennessee landlords have the right to make appropriate deductions from tenants’ security deposits. Landlords must provide a written, itemized list of deductions when withholding any portion of the deposit.

Permissible deductions include unpaid rent, damages beyond normal wear and tear, and other lease-specified charges. Normal wear and tear is not deductible. The following are the allowable reasons:

• Unpaid rent due under the lease agreement.
• Unpaid utility bills after the tenant moves out.
• Unpaid fees for any rent paid late.
• Any damages that arise due to the tenant’s violation of the lease.
• Cost of damage exceeding normal wear and tear.

There is also no cap on how many charges you can make for damages. The only requirement is that they must be in good faith.

Normal Wear and Tear Vs. Damage

Sometimes, a thin line exists between normal wear and tear and damage, and it’s no wonder this is often a point of conflict between landlords and tenants.

The following list contains the common examples of what constitutes damage:

• Torn or heavily stained carpets
• Smashed windows or mirrors
• A missing door handle
• Broken tiles
• Graffiti on walls or unauthorized paint colors
• Holes in walls

Normal wear and tear constitutes the following:

• Gently worn or stained carpets.
• Lightly scratched windows or mirrors.
• A loose door handle.
• Lightly scratched tiles.
• Faded paint.
• Minor scuffs on the walls from hanging pictures.

Timeline for Security Deposit Returns in Tennessee

After a tenant moves out of their Tennessee rental, landlords must first notify the tenant—either upon notice to vacate or within 5 days after the tenant’s intent to vacate— of their right to be present during the final inspection.

As a landlord, you must schedule the move out inspection during normal business hours. That inspection must occur either on the day of vacating or within 4 calendar days thereafter. If the tenant waives attending, they forfeit the right to dispute damages found.

The tenant may waive this right of attendance if any of the following occurs:

• They abandon the unit without giving a reason for doing so.
• They fail to contact the landlord after being notified of the inspection.
• They fail to attend the inspection.
• They are removed from the property after an eviction.

If the tenant agrees to attend the inspection, both of you must create a comprehensive list of damages to the rental unit (if any). Next, the tenant must either agree to the list by signing it or indicate the areas of dispute.

Landlords have 30 days after tenancy ends to either return the full deposit to the tenant’s new forwarding address or issue the remainder with an itemized list of deductions. If the tenant fails to provide a forwarding address after 60 days, the security deposit is forfeited to the landlord.

Conclusion

All these rules apply to landlords who require security deposits from tenants in Tennessee. The penalty for failing to keep them can be steep, not only to your bottom line but also to your reputation.

If you would like to learn more about how to remain legally compliant as a landlord, read our guide on landlord-tenant laws in Tennessee.

For expert help in any aspect of landlording in Memphis, look no further than Collaborate Real Estate Group LLC - Memphis.

Our specialty is managing single-family homes in Memphis and the surrounding areas. Get in touch to learn more about our services that can be tailored to meet your unique needs!

Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws frequently change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.