Security Deposit Return Deadlines & Deductions in Minnesota

At a glance

Requirements one by one

Return deadline and written statement

Section 504B.178, subdivision 3(a) says the landlord must return the deposit with interest or give a written statement showing the specific reason for withholding it within three weeks after tenancy termination. For a tenant who leaves because a building is legally condemned for reasons other than the tenant’s willful, malicious, or irresponsible conduct, it specifies five days after departure. The provision also requires receipt of the tenant’s mailing address or delivery instructions; it does not say that receipt starts a new three-week period.

Permitted deductions

Subdivision 3(b) limits withholding to amounts reasonably necessary for unpaid rent or other funds due under an agreement, or restoration to the condition at the tenancy’s start, except ordinary wear and tear. In a deposit action, subdivision 3(c) puts the burden of proving the reason for withholding on the landlord by a fair preponderance of the evidence.

Interest

Subdivision 2 requires simple, noncompounded interest at 1% per year from the first day of the month after the deposit was fully paid through the earlier of the month of good-faith compliance with subdivision 3 or a judgment. Interest under $1 is excluded.

Penalties

Subdivision 4 imposes an amount equal to the portion withheld plus interest as a penalty for its listed failures, in addition to the portion wrongfully withheld and interest. Subdivision 7 allows up to $500 more per deposit for bad-faith retention. If the landlord did not comply with subdivision 3 or 5, bad faith is presumed unless the deposit is returned within two weeks after a recovery action begins.

What trips people up

Mailing can satisfy the deadline: subdivision 3(b) accepts first-class mail, postage prepaid, with a proper return address and the tenant’s correct address or delivery instructions, placed in the mail within the required time.

The inspection rule has its own consequence. Section 504B.182, subdivision 2 requires notice of the option to request a move-out inspection and the right to attend; a requested inspection occurs no earlier than five days before the end or planned move-out. Section 504B.178, subdivision 4 includes certain missed inspection duties among its penalty triggers.

Common questions

Where can I bring a deposit recovery action? Section 504B.178, subdivision 9 permits an action, including conciliation court, in the county of the rental property or, at the tenant’s option, the landlord’s county of residence.

Can a lease waive these deposit rules? No. Subdivision 10 makes an attempted waiver by contract or otherwise void and unenforceable.

Statutes and sources

• Minn. Stat. § 504B.178, subd. 2: “Any deposit of money shall not be considered received in a fiduciary capacity within the meaning of section 82.55, subdivision 26, 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 one percent per annum, 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.” — https://www.revisor.mn.gov/statutes/cite/504B.178 (accessed 2026-10-07)
• Minn. Stat. § 504B.178, subd. 3(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.” — https://www.revisor.mn.gov/statutes/cite/504B.178 (accessed 2026-10-07)
• Minn. Stat. § 504B.178, subd. 3(b)-(c): “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.” — https://www.revisor.mn.gov/statutes/cite/504B.178 (accessed 2026-10-07)
• Minn. Stat. § 504B.178, subd. 4: “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; (3) transfer or return a deposit as required by subdivision 5; or (4) provide the tenant with notice for an initial inspection and move-out inspection as required by section 504B.182, and complete an initial inspection and move-out inspection when requested by the tenant, 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.” — https://www.revisor.mn.gov/statutes/cite/504B.178 (accessed 2026-10-07)
• Minn. Stat. § 504B.178, subd. 7: “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 $500 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.” — https://www.revisor.mn.gov/statutes/cite/504B.178 (accessed 2026-10-07)
• Minn. Stat. § 504B.182, subd. 2: “Within a reasonable time after notification of either a landlord or residential tenant's intention to terminate the tenancy, or before the end of the lease term, the landlord shall notify the tenant in writing of the tenant's option to request a move-out inspection and of the tenant's right to be present at the inspection.” — https://www.revisor.mn.gov/statutes/cite/504B.182 (accessed 2026-10-07)
• Minn. Stat. § 504B.178, subd. 3(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.” — https://www.revisor.mn.gov/statutes/cite/504B.178 (accessed 2026-10-07)
• Minn. Stat. § 504B.178, subd. 9: “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.” — https://www.revisor.mn.gov/statutes/cite/504B.178 (accessed 2026-10-07)
• Minn. Stat. § 504B.178, subd. 10: “Any attempted waiver of this section by a landlord and tenant, by contract or otherwise, shall be void and unenforceable.” — https://www.revisor.mn.gov/statutes/cite/504B.178 (accessed 2026-10-07)