9 Basics of Indiana's Security Deposit Law

Indiana landlord law allows landlords to collect a one-time deposit from tenants, which is known as a security deposit. Even though the deposit is in the landlord’s possession, it is still the property of the tenant unless the tenant breaches the lease agreement. Here are nine basic facts Indiana landlords and tenants should know about security deposits.

9 Basics of Indiana's Security Deposit Law

1. Security Deposit Limit- None
2. Forms of Payment- Cash, Check, Money Order, Lien on Car
3. Nonrefundable Deposit- Not Allowed
4. Storing Deposit- No Requirements
5. Written Notice- Not Required
6. Keeping Deposit- Unpaid Rent, Damage, Utility Bills, Last Month's Rent
7. Walk-Through Inspection- Not Required
8. Returning Deposit- Within 45 Days of Tenant Move-Out
9. Selling Property- Landlord Responsible for One Year After Sale Unless Transfers Deposits to New Owner

Is There a Security Deposit Limit in Indiana?

No. There is no limit in the state of Indiana as to the maximum amount a landlord can charge a tenant as a security deposit.

Does the Security Deposit Always Have to Be Cash/Check/Money Order?

There is an unusual law in the state of Indiana that allows landlords to place a lien on a tenant’s motor vehicle instead of collecting a traditional monetary security deposit. The landlord must file the lien under IC 32-33. The same laws that apply to all security deposits in the state of Indiana will still apply to this motor vehicle lien.

Can You Charge a Nonrefundable Deposit?

No. A security deposit is the property of the tenant. A landlord is entitled to make allowable deductions from the security deposit but must return whatever portion of the deposit that is owed back to the tenant.

How Must You Store the Security Deposit in Indiana?

There are no particular requirements as to how a landlord must store a tenant’s security deposit in the state of Indiana.

Is Written Notice Required After Receipt of the Security Deposit in Indiana?

No. Written notice is not required after receipt of the security deposit in Indiana.

What Are Some Reasons You Can Keep a Tenant’s Security Deposit in Indiana?

A landlord in the state of Indiana may retain all or a portion of a tenant’s security deposit for the following reasons:

• To Cover Unpaid Rent
• For Damages in Excess of Normal Wear and Tear
• Other Breaches of the Lease Agreement
• Unpaid Utility or Sewer Bills
• Last Month’s Rent
• - Only if the landlord and tenant have agreed, in writing, that the security deposit will be used as payment for the tenant’s final month of rent.

If a landlord wrongfully withholds all, or a portion of, a tenant’s security deposit, the tenant could be awarded up to the full amount of his or her security deposit plus reasonable attorney’s fees.

Is a Walk-Through Inspection Required in Indiana?

No. A landlord does not have to perform a walk-through inspection prior to a tenant’s move-out in the state of Indiana.

When Must You Return a Tenant’s Security Deposit in Indiana?

Indiana landlords have 45 days after the lease is terminated and the tenant moves out to return the portion of the tenant’s security deposit that is owed to the tenant as either a check or money order. Two conditions apply:

1. The landlord must also provide a written notice which itemizes the deductions from the security deposit. This list must include:
   1. 1. The Damaged Item
2. Approximate Cost of Repair
3. Amount Deducted From Security Deposit
4. If a landlord does not include this itemized list of damages, he or she is not allowed to withhold any of the tenant’s security deposit and must return the full amount of the deposit to the tenant.
5. The landlord is not liable to return the security deposit, or the portion owed to the tenant, until the tenant provides the landlord with a mailing address, in writing, where the landlord can send these documents.

What Happens to the Security Deposit If You Sell Your Property?

In the event that an Indiana landlord sells the investment property, or the property otherwise changes ownership, the landlord must notify the tenant’s in writing of this change in ownership.

Even after the sale, the landlord is still responsible for the proper return of all tenants’ security deposits for one year after the sale unless:

• He or she transfers the security deposits to the new owner. The new owner must then notify the tenants that he or she is now the owner and is in possession of their security deposits.

What Is Indiana's Security Deposit Law?

For the actual text of the law applying to security deposits in the state of Indiana, please consult Indiana Code Annotated §§ 32-31-3-1 to 32-31-3-19.