Indiana Landlord-Tenant Law: Security Deposits

A security deposit is a returnable sum of money that tenants pay to landlords or their representatives in advance of moving into a rental unit to guarantee that tenants perform their lease obligations. In most leases, the landlord agrees to hold the security deposit until the end of the lease; however, lease agreements may vary in how long each landlord holds a security deposit. The deposit is used to protect against financial losses resulting from the tenant’s breaches of their obligations under a lease and damage to a rental property. While the amount of a security deposit will vary from one landlord to another, it is often an amount equal to one month’s rent. Therefore, before move-in, a tenant is frequently required to pay two months’ rent upfront – one as a security deposit and another for the rent due.

Indiana’s landlord-tenant laws outline both the landlord’s and tenant’s rights and responsibilities regarding security deposits. At lease termination, whether due to the reaching the end date of a lease or by a sudden change in circumstances, the security deposit again becomes a relevant consideration for both the landlord and tenant. If the tenant follows all the requirements prescribed by the lease agreement for termination and has not damaged the leased property, they are likely to recover the entire security deposit initially paid to the landlord. However, some leases permit alternative uses of the security deposit. Therefore, tenants should familiarize themselves with their lease agreements to properly prepare for the process.

To trigger a landlord’s obligation to return the security deposit, a tenant must provide their landlord with written notice providing the tenant’s forwarding address when they move out of the rental property. The forwarding address informs the landlord of the place to send any remaining amount of the tenant’s security deposit after moving out. Some landlords may provide a form to their tenants to provide this information, but if not, it is still the tenant’s responsibility to provide their address in writing. Until a new address is provided, the landlord is not obligated to release the security deposit.

Indiana law provides specific rules for what kinds of costs can be deducted from a security deposit. Specifically, the deposit amount returned to the tenant may be reduced to cover any unpaid rent, outstanding balances on utility bills if the tenant was responsible for those bills, and damages that the landlord has or will suffer due to the tenant’s failure to comply with the lease or applicable laws. A landlord’s damages may amount to more or less than the security deposit amount, and damages can differ according to the severity of a landlord’s losses or the terms of the lease agreement.

Indiana’s landlord-tenant law provides that regardless of the damages incurred, any reduction in the security deposit’s total amount must be itemized by the landlord in a written notice to the tenant, which must be delivered within forty-five days after the termination of the rental agreement and return of the rental unit to the landlord. Again, this only applies once a tenant has provided their new address to the landlord. A landlord may forget to mail a letter on time or maybe preoccupied with other leases, causing an accidental failure to provide the itemized list on time. If a tenant properly provided their new address and the landlord fails to provide a notice of damages being deducted from the security deposit within forty-five days, the landlord is deemed to have agreed that no damages are due, and the entire amount of the security deposit must be returned. Moving out can be a stressful time for both the tenant and the landlord, but it is important for everyone involved that they know and comply with their obligations to ensure a smooth transition.

If you have any questions concerning rental agreements or issues concerning the obligation to return security deposits, please reach out to one of our attorneys at McNeelyLaw LLP by calling (317)825-5110.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.