Deposit limits, return deadlines, allowable deductions, and penalties under Tennessee law. Updated April 2026.
Tennessee does not impose a statutory limit on the amount a landlord may collect as a security deposit. Under Tenn. Code § 66-28-301, there is no cap tied to monthly rent or any other measure. Landlords are free to set deposit amounts based on the risk profile of the tenancy, property value, and market conditions. Common practice in Tennessee is one to two months' rent, though some landlords charge more for higher-risk tenants or luxury properties.
The absence of a statutory cap gives Tennessee landlords flexibility in risk management. Landlords may adjust deposit amounts based on factors such as credit history, rental history, pet ownership, and property condition. However, charging excessively high deposits relative to the rent can reduce the applicant pool and may be viewed unfavorably by courts in the event of a dispute.
While Tennessee does not cap the deposit amount, the landlord must still comply with the holding and return requirements under Tenn. Code § 66-28-301. The deposit must be held in a separate bank account, and it must be returned with an itemized statement within 30 days of move-out. Non-compliance with these requirements results in forfeiture of the right to retain any portion of the deposit, regardless of how much was collected.
Tennessee is stricter than many states regarding how security deposits must be held. Under Tenn. Code § 66-28-301(a), all security deposits must be deposited in an account used only for that purpose in any bank or other lending institution subject to regulation by the state of Tennessee or any agency of the United States government. This means the deposit cannot be commingled with the landlord's personal or operating funds.
While the account must be segregated, Tennessee does not require it to be an interest-bearing account, and there is no obligation to pay interest to the tenant on the deposit. The landlord is also not required to disclose the name of the bank or the account number to the tenant, though maintaining records of the account is advisable for compliance purposes.
Failure to deposit the security in a proper separate account has significant consequences. Under Tenn. Code § 66-28-301(a), no landlord shall be entitled to retain any portion of a security deposit if the security deposit was not deposited in a proper account. This means that even if the landlord has legitimate damage claims, holding the deposit in the wrong type of account forfeits the entire right to make deductions.
Under Tenn. Code § 66-28-301(g)(1), the landlord must return the security deposit within 30 days after the termination of the tenancy. The landlord must provide a written itemized list of any damages deducted from the deposit. If no damages exist, the full deposit must be returned within the 30-day period. The refund and statement should be sent to the tenant's last known address or forwarding address.
Tennessee includes a unique move-out inspection provision. Under Tenn. Code § 66-28-301(d), upon request by the landlord for a tenant to vacate (or within 5 days after the landlord receives the tenant's written intent to vacate), the landlord may provide notice of the tenant's right to be present at the move-out inspection. The inspection must occur on the day the tenant vacates or within 4 calendar days thereafter. This provision helps reduce disputes over deposit deductions.
If the landlord fails to provide the itemized list and refund within 30 days, the landlord forfeits the right to withhold any portion of the security deposit. This forfeiture applies regardless of whether the landlord has legitimate damage claims. Additionally, if the landlord acts in bad faith by retaining the deposit without justification, the tenant may recover the deposit plus reasonable attorney fees. Tennessee courts take the 30-day deadline seriously, and landlords should err on the side of sending the itemized statement early.
Under Tenn. Code § 66-28-301(b), the landlord may deduct from the security deposit for actual damages sustained as a result of the tenant's noncompliance with the rental agreement or Tenn. Code § 66-28-401 (tenant obligations), excepting normal wear and tear. The landlord may also deduct for unpaid rent through the end of the lease term or until the unit is re-rented, whichever occurs first.
Common allowable deductions include repairs for tenant-caused damage such as holes in walls, broken fixtures, stained or burned flooring, damaged appliances, missing items, excessive cleaning costs, and unauthorized modifications. Normal wear and tear—including minor scuffs, faded paint, worn carpet in traffic areas, and light scratches on hard surfaces—cannot be deducted. The distinction between damage and normal wear is one of the most common areas of dispute.
To support deductions, landlords must provide a written itemized list detailing each item of damage, the cost of repair, and the specific amount deducted. Obtaining actual repair invoices, contractor estimates, or receipts strengthens the landlord's position. Conducting a thorough move-in inspection with photographs and a written condition report is essential for establishing the baseline condition of the property and supporting any claims for tenant-caused damage at move-out.
Tennessee's penalty for security deposit noncompliance is forfeiture. Under Tenn. Code § 66-28-301(a), a landlord who fails to deposit the security in a proper separate account forfeits the right to retain any portion of the deposit. Under Tenn. Code § 66-28-301(g)(1), failure to provide the itemized statement and refund within 30 days also results in forfeiture of the right to withhold any amount.
In addition to forfeiture, a tenant may recover reasonable attorney fees if the landlord acts in bad faith. While Tennessee does not impose statutory treble or double damages for security deposit violations (unlike some states), the complete forfeiture of the right to withhold—even when legitimate damages exist—can be a significant financial penalty for landlords who fail to follow procedures.
Landlords can protect themselves by maintaining the deposit in a proper separate account from day one, conducting documented move-in and move-out inspections, preparing the itemized statement promptly after move-out, and mailing the statement and any refund well before the 30-day deadline. Using certified mail provides proof of timely mailing. If there is a dispute over the amount of deductions, it is always better to send the statement with a partial refund on time than to miss the deadline.
For Section 8 tenants in Tennessee, the security deposit is the tenant's responsibility—the PHA does not pay it. Since Tennessee has no statutory cap, landlords may charge voucher holders any amount, though charging a significantly higher deposit to Section 8 tenants than to market-rate tenants could raise fair housing concerns.
All holding and return requirements apply equally to Section 8 tenancies. The deposit must be held in a separate account, returned within 30 days with an itemized statement, and the tenant has the right to attend the move-out inspection. The refund goes to the tenant, not the PHA. Landlords should apply the same deduction standards regardless of the tenant's voucher status.
The move-out inspection provision is particularly useful for Section 8 tenancies. Having the tenant present during the inspection creates a shared understanding of the property's condition and can reduce disputes. Since the PHA conducts its own HQS inspections, there is often a record of the unit's condition that can serve as reference. Landlords should document the condition independently with photographs at both move-in and move-out.
Yes. Under Tenn. Code § 66-28-301(a), security deposits must be held in an account used only for that purpose in a regulated financial institution. Commingling deposits with personal or operating funds forfeits the right to withhold any portion of the deposit.
Yes. Under Tenn. Code § 66-28-301(d), the tenant has the right to be present at the move-out inspection. The landlord must provide notice of this right, and the inspection must occur on the day the tenant vacates or within 4 calendar days.
The landlord forfeits the right to withhold any portion of the security deposit, regardless of whether legitimate damages exist. The tenant may also recover reasonable attorney fees if the landlord acted in bad faith.
No. Tennessee has no statutory cap on security deposit amounts. Landlords may charge any amount, though market norms typically range from one to two months' rent. The deposit must be held in a separate account regardless of the amount.
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