Security Deposit Law
What Arkansas landlords must do with security deposits — the cap, interest, return deadline, account rules, and penalties — with citations to the statute itself.
Verified as of June 11, 2026
This page is general information, not legal advice. Statutes change — verify with the cited sources or an attorney.
Deposit cap
Maximum 2 months' rent (covered landlords only).
Interest
No interest required.
Return deadline
Return within 60 days of termination of the tenancy, with an itemized written notice for any deductions.
Ark. Code § 18-16-304 provides: "A landlord may not demand or receive a security deposit, however denominated, in an amount or value in excess of two (2) months periodic rent." The cap — like the rest of the subchapter — does not apply to exempt small landlords under § 18-16-303 (5 or fewer units, self-managed).
Arkansas's security deposit subchapter (Ark. Code §§ 18-16-301 to -306) contains no requirement that landlords pay or credit interest on security deposits. Landlords may keep any interest the deposit earns unless the lease says otherwise.
Ark. Code §§ 18-16-301 to 18-16-306 (subchapter contains no interest provision)
Ark. Code § 18-16-305(a)(1): "Within sixty (60) days of termination of the tenancy, property or money held by the landlord as security shall be returned to the tenant." Deposit money may be applied only to "accrued unpaid rent and any damages which the landlord has suffered by reason of the tenant's noncompliance with the rental agreement, all as itemized by the landlord in a written notice delivered to the tenant, together with the remainder of the amount due sixty (60) days after termination of the tenancy and delivery of possession by the tenant." Mailing the notice and payment by first-class mail to the tenant's last known address constitutes compliance; if the payment letter is returned and the tenant can't be located after reasonable effort, the payment becomes the landlord's property 180 days from the mailing date (§ 18-16-305(b)).
Arkansas statute imposes no requirement to hold security deposits in a separate, escrow, or trust account, and no bank-disclosure requirement. The subchapter regulates only the maximum amount, the 60-day refund/itemization duty, and remedies.
Ark. Code §§ 18-16-301 to 18-16-306 (no holding/escrow provision)
Under Ark. Code § 18-16-306(a)(1), a tenant may recover "(A) The property and money due him or her; (B) Damages in an amount equal to two (2) times the amount wrongfully withheld; (C) Costs; and (D) Reasonable attorney's fees." There is a safe harbor: the landlord is "liable only for costs and the sum erroneously withheld" if it proves by a preponderance that noncompliance "[r]esulted from an error which occurred despite the existence of procedures reasonably designed to avoid such errors" or "[w]as based on a good faith dispute as to the amount due" (§ 18-16-306(a)(2)).
No Arkansas city or county may impose its own security-deposit-amount rules. Act 459 of 2025 (SB 91, approved April 3, 2025) amended Ark. Code §§ 14-16-601 and 14-54-1409 to provide that, "except as provided under § 18-16-304," a local governmental unit shall not "enact, maintain, or enforce an ordinance or resolution that would have the effect of controlling the amount charged for: (A) Rent; (B) Rental application fees; or (C) Rental deposits," with the preemption applying to all landlords, property owners, property managers, tenants, prospective tenants, and real estate companies doing business in Arkansas. This is affirmative statewide preemption of local deposit-amount regulation (effective 2025); the state two-month cap in § 18-16-304 is expressly preserved. Local governments retain control only over residential property in which they hold a property interest.
Section 18-16-304 caps any "security deposit, however denominated" at two months' periodic rent. That phrasing sweeps in pet deposits, damage deposits, and other refundable deposits — the combined total cannot exceed two months' rent for covered landlords.
The entire subchapter does not apply if the individual owner — counting units owned by the owner, spouse, minor children, and any rental entities they control — collectively owns five or fewer dwelling units. The exemption is lost "for units for which management, including rent collection, is performed by third persons for a fee" (§ 18-16-303(b)).
The deposit must be returned within 60 days of termination of the tenancy. Deductions are limited to accrued unpaid rent and damages from the tenant's noncompliance with the rental agreement, and every deduction must be itemized in a written notice delivered to the tenant with the remaining balance.
A landlord complies by mailing the written notice and payment via first-class mail to the tenant's last known address. If the payment letter comes back and the tenant cannot be located after reasonable effort, "the payment shall become the property of the landlord one hundred eighty (180) days from the date the payment was mailed" (§ 18-16-305(b)(2)).
Under § 18-16-302, "[t]he transferee, assignee, or other holder of the landlord's interest in the premises at the time of the termination of the tenancy is bound by this subchapter." If you buy an occupied rental, you take on the deposit-return duty — get deposit balances transferred at closing.
Act 459 of 2025 (SB 91, approved April 3, 2025) amended Ark. Code §§ 14-16-601 and 14-54-1409 so that, "except as provided under § 18-16-304," a local governmental unit "shall not enact, maintain, or enforce an ordinance or resolution that would have the effect of controlling the amount charged for: (A) Rent; (B) Rental application fees; or (C) Rental deposits." The state two-month cap is expressly preserved; only local deposit-amount rules are preempted.
Act 459 of 2025 (SB 91), amending Ark. Code §§ 14-16-601 and 14-54-1409
The five-or-fewer-units exemption "does not apply to units for which management, including rent collection, is performed by third persons for a fee" (§ 18-16-303(b)). A two-unit owner using a fee-based manager (including rent-collection software services structured as third-party fee management) is fully subject to the cap, the 60-day deadline, and double-damages exposure.
Noncompliance with § 18-16-305 exposes the landlord to the tenant recovering the money due plus "[d]amages in an amount equal to two (2) times the amount wrongfully withheld," costs, and reasonable attorney's fees under § 18-16-306(a)(1).
Because § 18-16-304 caps any deposit "however denominated" at two months' periodic rent, labeling extra refundable amounts as pet or damage deposits does not escape the cap for covered landlords — the excess is demanded in violation of the statute.
Section 18-16-305(a)(2) permits applying the deposit only to "accrued unpaid rent and any damages which the landlord has suffered by reason of the tenant's noncompliance with the rental agreement." Deductions outside those categories (e.g., routine turnover costs not tied to a lease breach) are wrongful withholding, triggering § 18-16-306 double damages unless the good-faith-dispute safe harbor applies.
The 180-day vesting rule in § 18-16-305(b)(2) only applies if the landlord first mailed the notice and payment first-class to the last known address, the letter was returned, and the landlord made reasonable efforts to locate the tenant. Skipping the mailing means the landlord never complied with subsection (a) and remains exposed under § 18-16-306.
Up to two months' periodic rent, total, no matter what the deposit is called (Ark. Code § 18-16-304). The cap applies to landlords covered by the security-deposit subchapter — owners of more than five dwelling units, or any owner whose units are managed by a third party for a fee. Self-managing owners of five or fewer units are exempt from the statute, though staying within two months is still the safe practice.
60 days from termination of the tenancy (Ark. Code § 18-16-305). If you make deductions, you must deliver a written itemization to the tenant along with the remaining balance. Mailing both by first-class mail to the tenant's last known address counts as compliance.
Only accrued unpaid rent and damages you suffered because the tenant failed to comply with the rental agreement, and every deduction must be itemized in a written notice (Ark. Code § 18-16-305(a)(2)). Deductions for things unrelated to unpaid rent or a lease breach risk being treated as wrongful withholding.
The tenant can sue to recover the money due plus double the amount wrongfully withheld, plus court costs and reasonable attorney's fees (Ark. Code § 18-16-306). There's a safe harbor limiting liability to costs and the sum erroneously withheld if the landlord proves the failure was a procedural error despite reasonable safeguards or a good-faith dispute over the amount due.
No. Arkansas's security-deposit statute (Ark. Code §§ 18-16-301 to -306) has no separate-account, escrow, or interest requirement. Keeping deposits in a dedicated account is still good bookkeeping, but it isn't legally required.
Not if they qualify for the exemption: the subchapter doesn't apply to an individual owner who — together with a spouse, minor children, and any rental entities they control — owns five or fewer dwelling units (Ark. Code § 18-16-303). But the exemption disappears for any unit managed by a third party for a fee, including fee-based rent collection.
No. Act 459 of 2025 (effective 2025) amended Ark. Code §§ 14-16-601 and 14-54-1409 to bar local governments from regulating the amount charged for rent, rental application fees, or rental deposits on private residential or commercial property. The statewide two-month cap in § 18-16-304 still applies.
This page is general information, not legal advice. Statutes change — verify with the cited sources or an attorney.
Statute facts on this page were verified against the cited official sources on June 11, 2026.
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