Security Deposit Law
What Indiana 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
No statutory limit on the deposit amount.
Interest
No interest is required on tenant deposits.
Return deadline
45 days to deliver an itemized written notice and refund the balance.
Indiana Code chapter 32-31-3 defines and regulates security deposits but sets no maximum. Note the definition is broad: prepaid rent beyond the first full rental period and above-average rent payments count as part of the 'security deposit' (§ 32-31-3-9(b)) and are subject to the chapter's return rules.
IC 32-31-3 is silent on interest; no Indiana statute requires landlords to pay interest on residential security deposits or hold them in interest-bearing accounts.
Per § 32-31-3-12(a), deductions must be "itemized by the landlord with the amount due in a written notice that is delivered to the tenant not more than forty-five (45) days after termination of the rental agreement and delivery of possession." § 32-31-3-14 separately requires mailing an itemized damage list within 45 days of termination of occupancy, with the estimated cost of repair for each item, accompanied by a check or money order for the difference. Important gate: "The landlord is not liable under this chapter until the tenant supplies the landlord in writing with a mailing address to which to deliver the notice and amount."
IC 32-31-3 imposes no requirement to hold deposits in a separate, trust, or escrow account; Indiana landlords may commingle deposit funds, though separating them remains good bookkeeping practice.
If a landlord fails to comply with § 12(a), "a tenant may recover all of the security deposit due the tenant and reasonable attorney's fees" (§ 32-31-3-12(b)). Failure to mail the § 14 damage list "constitutes agreement by the landlord that no damages are due, and the landlord must remit to the tenant immediately the full security deposit" (§ 32-31-3-15); a landlord who fails to comply with §§ 14-15 is liable for the withheld portion "plus reasonable attorney's fees and court costs" (§ 32-31-3-16).
None known. No Indiana city or county imposes its own security-deposit rules on top of IC 32-31-3; the state statute controls statewide.
Within 45 days of lease termination and delivery of possession, deliver a written notice itemizing every deduction with the amount due, including the estimated cost of repair for each damaged item, and enclose a check or money order for the balance of the deposit.
Under § 13 the deposit may cover only: (1) actual damage to the unit or ancillary facilities beyond ordinary wear and tear, (2) rent in arrears and rent due for the tenant's premature termination, (3) the last rental period if a written agreement says the deposit serves as last month's rent, and (4) unpaid utility or sewer charges the tenant owed under the lease.
You are "not liable under this chapter until the tenant supplies the landlord in writing with a mailing address" for delivery of the notice and refund. Document when (and whether) the tenant provides it.
"A waiver of this chapter by a landlord or tenant is void" — you cannot contract around the 45-day notice duty, the permitted-use limits, or the penalty provisions.
After a good-faith sale to a bona fide purchaser, the seller remains liable to tenants for deposits for one year after notice of the conveyance unless the buyer notifies tenants it has assumed the liability and the seller actually transfers the deposits at closing. The owner at the time of termination is bound by § 12.
"Unless otherwise agreed, a tenant is not entitled to apply a security deposit to rent" — a tenant who skips last month's rent expecting the deposit to cover it is in arrears unless the lease says otherwise.
Statutorily deemed an agreement that no damages are due: you must immediately remit the full deposit, and you become liable for the withheld amount plus the tenant's reasonable attorney fees and court costs — even if the unit genuinely was damaged.
§ 13(1) limits damage deductions to actual damage 'not the result of ordinary wear and tear'; an improper deduction is noncompliance with § 12(a), exposing you to repayment of the full deposit plus attorney fees.
§ 14 requires the list to set forth the estimated cost of repair for each damaged item and to be accompanied by a check or money order for the difference; an incomplete notice risks being treated as noncompliance under §§ 15-16.
Void by statute — the deposit rules apply regardless of what the lease says, and the clause may undermine your credibility in a deposit dispute.
The seller remains liable to tenants for the deposits for one year after notice of the conveyance unless the buyer gives tenants notice of assumption and the deposits are actually transferred at conveyance.
45 days after the rental agreement ends and the tenant delivers possession. Within that window you must deliver a written, itemized notice of any deductions and refund the balance by check or money order (Ind. Code §§ 32-31-3-12, 32-31-3-14). The clock practically starts once the tenant gives you a mailing address in writing.
No. Indiana sets no cap on deposit amounts. Be aware that prepaid rent beyond the first full rental period counts as part of the 'security deposit' under § 32-31-3-9, so it is subject to the 45-day return and itemization rules.
Only four things (Ind. Code § 32-31-3-13): actual damage beyond ordinary wear and tear, unpaid rent including rent owed for early termination, the last rental period if a written agreement designates the deposit as last month's rent, and unpaid utility or sewer charges the tenant owed under the lease.
The statute treats your silence as agreement that no damages are due: you must immediately refund the entire deposit, and the tenant can recover the withheld amount plus reasonable attorney fees and court costs (Ind. Code §§ 32-31-3-15, 32-31-3-16). You lose the deductions even if the damage was real.
No on both counts. Indiana Code chapter 32-31-3 is silent on interest and imposes no separate-account or escrow requirement, though segregating deposit funds is still wise bookkeeping.
Under § 32-31-3-12(a), you are 'not liable under this chapter until the tenant supplies the landlord in writing with a mailing address' for delivery of the notice and refund. Keep proof of whether and when the address arrived, and send the itemized notice promptly once it does.
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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