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504B.178 INTEREST ON SECURITY DEPOSITS; WITHHOLDING SECURITY
DEPOSITS; DAMAGES; LIMIT ON WITHHOLDING LAST MONTH'S RENT.
    Subdivision 1. Applicability. Any deposit of money, the function of which is to secure the
performance of a residential rental agreement or any part of such an agreement, other than a
deposit which is exclusively an advance payment of rent, shall be governed by the provisions
of this section.
    Subd. 2. Interest. Any deposit of money shall not be considered received in a fiduciary
capacity within the meaning of section 82.17, subdivision 24, but shall be held by the landlord for
the tenant who is party to the agreement and shall bear simple noncompounded interest at the rate
of three percent per annum until August 1, 2003, and one percent per annum thereafter, computed
from the first day of the next month following the full payment of the deposit to the last day of
the month in which the landlord, in good faith, complies with the requirements of subdivision
3 or to the date upon which judgment is entered in any civil action involving the landlord's
liability for the deposit, whichever date is earlier. Any interest amount less than $1 shall be
excluded from the provisions of this section.
    Subd. 3. Return of security deposit. (a) Every landlord shall:
(1) within three weeks after termination of the tenancy; or
(2) within five days of the date when the tenant leaves the building or dwelling due to the
legal condemnation of the building or dwelling in which the tenant lives for reasons not due to
willful, malicious, or irresponsible conduct of the tenant,
and after receipt of the tenant's mailing address or delivery instructions, return the deposit to
the tenant, with interest thereon as provided in subdivision 2, or furnish to the tenant a written
statement showing the specific reason for the withholding of the deposit or any portion thereof.
(b) It shall be sufficient compliance with the time requirement of this subdivision if the
deposit or written statement required by this subdivision is placed in the United States mail as
first class mail, postage prepaid, in an envelope with a proper return address, correctly addressed
according to the mailing address or delivery instructions furnished by the tenant, within the
time required by this subdivision. The landlord may withhold from the deposit only amounts
reasonably necessary:
(1) to remedy tenant defaults in the payment of rent or of other funds due to the landlord
pursuant to an agreement; or
(2) to restore the premises to their condition at the commencement of the tenancy, ordinary
wear and tear excepted.
(c) In any action concerning the deposit, the burden of proving, by a fair preponderance of
the evidence, the reason for withholding all or any portion of the deposit shall be on the landlord.
    Subd. 4. Damages. Any landlord who fails to:
(1) provide a written statement within three weeks of termination of the tenancy;
(2) provide a written statement within five days of the date when the tenant leaves the
building or dwelling due to the legal condemnation of the building or dwelling in which the tenant
lives for reasons not due to willful, malicious, or irresponsible conduct of the tenant; or
(3) transfer or return a deposit as required by subdivision 5,
after receipt of the tenant's mailing address or delivery instructions, as required in subdivision 3,
is liable to the tenant for damages in an amount equal to the portion of the deposit withheld by the
landlord and interest thereon as provided in subdivision 2, as a penalty, in addition to the portion
of the deposit wrongfully withheld by the landlord and interest thereon.
    Subd. 5. Return of deposit. Upon termination of the landlord's interest in the premises,
whether by sale, assignment, death, appointment of receiver or otherwise, the landlord or the
landlord's agent shall, within 60 days of termination of the interest or when the successor in
interest is required to return or otherwise account for the deposit to the tenant, whichever occurs
first, do one of the following acts, either of which shall relieve the landlord or agent of further
liability with respect to such deposit:
(1) transfer the deposit, or any remainder after any lawful deductions made under subdivision
3, with interest thereon as provided in subdivision 2, to the landlord's successor in interest and
thereafter notify the tenant of the transfer and of the transferee's name and address; or
(2) return the deposit, or any remainder after any lawful deductions made under subdivision
3, with interest thereon as provided in subdivision 2, to the tenant.
    Subd. 6. Successor in interest. Upon termination of the landlord's interest in the premises,
whether by sale, assignment, death, appointment of receiver or otherwise, the landlord's successor
in interest shall have all of the rights and obligations of the landlord with respect to the deposit,
except that if tenant does not object to the stated amount within 20 days after written notice to
tenant of the amount of deposit being transferred or assumed, the obligation of the landlord's
successor to return the deposit shall be limited to the amount contained in the notice. The notice
shall contain a stamped envelope addressed to landlord's successor and may be given by mail or
by personal service.
    Subd. 7. Bad faith retention. The bad faith retention by a landlord of a deposit, the interest
thereon, or any portion thereof, in violation of this section shall subject the landlord to punitive
damages not to exceed $200 for each deposit in addition to the damages provided in subdivision
4. If the landlord has failed to comply with the provisions of subdivision 3 or 5, retention of a
deposit shall be presumed to be in bad faith unless the landlord returns the deposit within two
weeks after the commencement of any action for the recovery of the deposit.
    Subd. 8. Withholding rent. No tenant may withhold payment of all or any portion of rent
for the last payment period of a residential rental agreement, except an oral or written month to
month residential rental agreement concerning which neither the tenant nor landlord has served a
notice to quit, on the grounds that the deposit should serve as payment for the rent. Withholding
all or any portion of rent for the last payment period of the residential rental agreement creates a
rebuttable presumption that the tenant withheld the last payment on the grounds that the deposit
should serve as payment for the rent. Any tenant who remains in violation of this subdivision after
written demand and notice of this subdivision shall be liable to the landlord for the following:
(1) a penalty in an amount equal to the portion of the deposit which the landlord is entitled to
withhold under subdivision 3 other than to remedy the tenant's default in the payment of rent; and
(2) interest on the whole deposit as provided in subdivision 2, in addition to the amount of
rent withheld by the tenant in violation of this subdivision.
    Subd. 9. Action to recover deposit. An action, including an action in conciliation court,
for the recovery of a deposit on rental property may be brought in the county where the rental
property is located, or at the option of the tenant, in the county of the landlord's residence.
    Subd. 10. Waiver. Any attempted waiver of this section by a landlord and tenant, by contract
or otherwise, shall be void and unenforceable.
    Subd. 11. Tenancies after July 1, 1973. The provisions of this section shall apply only to
tenancies commencing or renewed on or after July 1, 1973. For the purposes of this section,
estates at will shall be deemed to be renewed at the commencement of each rental period.
History: 1999 c 199 art 1 s 16; 2000 c 282 s 1; 2003 c 52 s 2; 2004 c 203 art 2 s 61

Official Publication of the State of Minnesota
Revisor of Statutes