Real Estate Blog

The state of Tennessee, just like other states, has pretty straightforward security deposit laws. These laws define important things, such as where a landlord stores the deposit, reasons to keep a tenant’s deposit, when to return it after a tenant moves out, and more. 

As a landlord, it’s your responsibility to ensure your actions align with the provisions of the law when handling a tenant’s security deposit. 

Here are answers to common questions regarding security deposits in Tennessee: 

Question #1: Is there a security deposit limit in Tennessee?

Some states limit how much a landlord can charge their tenants as a security deposit. This is, however, not the case in Tennessee. As a landlord, you’re free to charge any reasonable amount. 

But while there may be no statewide statute, make sure to check local county or city ordinances as those might impose a limit. 

Question #2: How should Tennessee landlords store a tenant’s security deposit? 

In the state of Tennessee, landlords must store a tenant’s deposit in a separate account. The account must be in a financial institution that’s subject to either the state’s regulations or federal regulations. 

Does it have to earn interest? Not necessarily. 

If you fail to store the deposit correctly, you’ll forfeit your right to withhold any portion of it. 

Question #3: Do Tennessee tenants have a right to be notified with the receipt of their deposit? 

Yes. As a landlord, you are required to notify your tenant upon receiving the receipt of their deposit. The notice must be written and must mention the financial institution holding the funds. 

You aren’t, however, required to provide the tenant with the account number. 

Question #4: Can you keep all or part of the tenant’s security deposit? 

Yes, you can. You can keep part or all of a tenant’s security deposit to help cover:

• Unpaid utilities at move out. During a tenancy, a tenant is responsible for paying some utility bills. So, if they move out without clearing them, you can make the appropriate deductions from their security deposit. 

• Excessive cleaning costs. Usually, tenants are required to leave the premises in the same condition they found it when moving in, other than normal wear and tear. If they don’t, you can use part or all of the deposit to restore the property to its original condition. 

• Loss in rent payments. Nonpayment of rent is a serious lease violation. Sadly, it’s a common problem Tennessee landlords experience. Should it occur, you’ll be entitled to deduct from their deposit to cover the payments, even in the case of an eviction. 

• Lost rental income. Life happens, and a tenant may choose to abandon the premises. They may also choose to move out early before the expiry of the lease. To recoup your losses, you can deduct appropriate amounts from the tenant’s security deposit. 

• Excessive property damage. You can also make appropriate deductions to a tenant’s deposit if they cause negligent property damage. Examples of such damages include large holes in walls and broken windows. Please take note, however, that you cannot do the same for damages resulting from normal wear and tear. 

Question #5: Are Tennessee landlords entitled to a walk-through inspection? 

Yes. Tennessee tenants are entitled to a walk-through inspection. The goal of a walk-through inspection is to ascertain the condition of the property relative to its initial condition. 

When planning for the inspection, there are a few things you’ll need to keep in mind: 

• You must notify the tenant in writing about the rights to the inspection. This is done when either giving the tenant a notice to move out or within 5 days after receipt of their written notice to move out. 

• The walk-through inspection must be held within 4 days before the tenant vacates the unit. 

• The tenant can request a time for the inspection. But if they do so and fail to show up, they will lose their right to contest any deductions made to their deposit. For this condition to be valid, you must state it clearly in the lease agreement.

• If the tenant shows up for the inspection, both parties must go through the property and document any damages done. Then, both parties must write their signature on the list. If the tenant signs it, it will serve as proof of their responsibility for the damages. But if they don’t, they must indicate the damages they are contesting and can then pursue legal action. 

Question #6: Do all tenants have a right to a walk-through inspection? 

No. Some tenants aren’t entitled to a walk-through inspection. Such tenants are those that have:

• Abandoned the unit.

• Moved out without providing the right notice. 

• Been forcefully removed from the premises through a court order.

• Failed to respond to the landlord’s request to have the unit inspected. 

• Failed to show up during the walk-through inspection. 

That said, however, tenants do have a right to the inspection report. If requested, you must send a copy to the tenant via certified mail. 

Question #7: How long can a landlord keep a security deposit in Tennessee? 

First and foremost, you must send the tenant a notification to their last known address. The notification must include the deposit owed to the tenant, as well as an itemized list of damages. 

If the tenant fails to respond to the notification within sixty days, they forfeit their right to claim it. 

Question #8: What happens if the property changes hands during the tenancy? 

If you sell the property or the property otherwise changes hands, you are required to transfer the tenant’s deposit to the incoming owner. You must then notify the tenant of the same. The notice must be in writing. 

After doing that, the incoming owner becomes responsible for storing the tenant’s deposit. 

Disclaimer: All information is believed to be accurate but not guaranteed and should be independently verified. If you have any questions regarding this content, please don’t hesitate to reach out to us.