Security Deposit Law
What New Mexico 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 16, 2026
This page is general information, not legal advice. Statutes change — verify with the cited sources or an attorney.
Deposit cap
Leases under one year: max one month's rent. Annual leases: no fixed dollar cap, but the deposit must be reasonable.
Interest
Interest is owed only when an annual-lease deposit exceeds one month's rent.
Return deadline
30 days to return the deposit balance with an itemized deduction list.
For a rental agreement shorter than one year, an owner 'shall not demand or receive from the resident such a deposit in an amount in excess of one month's rent' (§ 47-8-18(A)(2)). For an annual lease the statute authorizes only 'a reasonable deposit' with no fixed dollar cap — and New Mexico courts have refused to treat grossly excessive amounts as security deposits at all: Hedicke v. Gunville, 2003-NMCA-032, held a $50,000 deposit (about 32 times the monthly rent) was not a valid security deposit ('a deposit under the statute was required to be reasonable... but not by a multiple of 32').
If, under an annual rental agreement, the owner takes a deposit greater than one month's rent, the owner 'shall be required to pay to the resident annually an interest equal to the passbook interest permitted to savings and loan associations in this state by the federal home loan bank board on such deposit' (§ 47-8-18(A)(1)). No interest is required on deposits of one month's rent or less, or on any deposit under a lease shorter than one year (where deposits above one month's rent are prohibited).
The clock runs from 'termination of the rental agreement or resident departure, whichever is later.' If any portion is retained for actual cause, the owner must give the resident an itemized written list of deductions and the balance within that 30-day window; the owner 'is deemed to have complied with this section by mailing the statement and any payment required to the last known address of the resident' (§ 47-8-18(C)).
Section 47-8-18 imposes no escrow, trust-account, or separate-bank-account requirement on security deposits; the statute regulates the amount, interest (annual leases over one month's rent), deductions, and the 30-day return, but is silent on where the money is held.
Under § 47-8-18(D), an owner who fails to provide the written deduction statement and balance within 30 days '(1) shall forfeit the right to withhold any portion of the deposit; (2) shall forfeit the right to assert any counterclaim in any action brought to recover that deposit; (3) shall be liable to the resident for court costs and reasonable attorneys' fees; and (4) shall forfeit the right to assert an independent action against the resident for damages to the rental property.' Under § 47-8-18(E), 'An owner who in bad faith retains a deposit in violation of this section is liable for a civil penalty in the amount of two hundred fifty dollars ($250) payable to the resident.'
None identified. New Mexico's Uniform Owner-Resident Relations Act applies statewide, and no municipal security-deposit ordinance was found for Albuquerque, Santa Fe, or Las Cruces (negative claim — see couldNotConfirm).
Section 47-8-18(A) authorizes only 'a reasonable deposit.' Annual leases have no fixed dollar cap, but the Court of Appeals in Hedicke v. Gunville, 2003-NMCA-032, refused to treat a $50,000 deposit (~32x monthly rent) as a security deposit at all, reasoning a deposit 'was required to be reasonable... but not by a multiple of 32.'
NMSA 1978 § 47-8-18(A); Hedicke v. Gunville, 2003-NMCA-032, 133 N.M. 335, 62 P.3d 1217
For any rental agreement with a term under one year (including month-to-month), the owner 'shall not demand or receive... a deposit in an amount in excess of one month's rent' (§ 47-8-18(A)(2)).
On an annual lease, a deposit exceeding one month's rent triggers annual interest 'equal to the passbook interest permitted to savings and loan associations in this state by the federal home loan bank board' (§ 47-8-18(A)(1)). Remember the deposit must still be reasonable — New Mexico courts have refused to treat grossly excessive amounts as deposits (Hedicke v. Gunville, 2003-NMCA-032).
Deductions require 'actual cause' and an itemized written list plus the balance within 30 days of termination or departure, whichever is later. Mailing the statement and payment to the resident's last known address satisfies the statute (§ 47-8-18(C)).
'No deposit shall be retained to cover normal wear and tear' (§ 47-8-18(C)). Deposits may be applied to unpaid rent, utilities, repair work, and other legitimate damages from noncompliance with the rental agreement or § 47-8-22.
Section 47-8-18(B) excludes 'the last month's prepaid rent' from the section, and a deposit under (A)(1) 'shall not be construed as prepaid rent' — keep the two buckets separate in your lease and your books.
You forfeit the right to withhold any of the deposit, forfeit all counterclaims and any independent damage action against the resident, and owe their court costs and reasonable attorney fees (§ 47-8-18(D); applied in Garcia v. Thong, 1995-NMSC-030).
The charge directly violates § 47-8-18(A)(2) ('shall not demand or receive... in excess of one month's rent'), exposing the owner to the section's forfeiture and penalty provisions and to bad-faith liability under (E).
A grossly excessive amount may not qualify as a security deposit at all — in Hedicke v. Gunville, 2003-NMCA-032, a $50,000 deposit (~32x monthly rent) was held not to be a valid security deposit, putting the arrangement outside the statute's framework entirely.
Prohibited outright: 'No deposit shall be retained to cover normal wear and tear' (§ 47-8-18(C)); improper retention in bad faith adds a $250 civil penalty under (E) on top of forfeiture exposure.
Any annual-lease deposit above one month's rent owes the resident interest annually at the statutory passbook rate (§ 47-8-18(A)(1)); failure to pay is a violation of the section with bad-faith exposure under (E).
It depends on lease length. For leases shorter than one year (including month-to-month), the cap is one month's rent. For annual leases there is no fixed dollar cap, but the deposit must be reasonable — New Mexico courts have refused to treat grossly excessive amounts as security deposits at all (Hedicke v. Gunville, 2003-NMCA-032, rejected a deposit of roughly 32 times the monthly rent). NMSA 1978 § 47-8-18(A).
30 days from termination of the rental agreement or the resident's departure, whichever is later. If you keep any portion, you must send an itemized written list of deductions plus the remaining balance; mailing it to the resident's last known address counts as compliance. NMSA 1978 § 47-8-18(C).
The penalties are severe: you forfeit the right to withhold any of the deposit, forfeit any counterclaim in a suit over the deposit, forfeit any independent damage action against the resident, and you owe the resident's court costs and reasonable attorney fees. Bad-faith retention adds a $250 civil penalty. NMSA 1978 § 47-8-18(D), (E).
Only in one scenario: an annual lease where the deposit exceeds one month's rent. Then you must pay interest annually at the statutory 'passbook' savings rate. Deposits of one month's rent or less, and all deposits on leases under a year, earn no required interest. NMSA 1978 § 47-8-18(A)(1).
No. The statute says flatly that no deposit shall be retained to cover normal wear and tear. You may deduct for unpaid rent, unpaid utilities, repair work, and other legitimate damages caused by the resident's noncompliance. NMSA 1978 § 47-8-18(C).
No. Section 47-8-18 has no escrow or separate-account requirement — it regulates the amount, interest on large annual-lease deposits, allowable deductions, and the 30-day return, but not where the money is held. Keeping deposits segregated is still good practice for accounting and bad-faith defense.
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 16, 2026.
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