New Mexico Security Deposit Laws in 2024

Introduction to New Mexico Security Deposit Laws

Security deposits are funds paid by a tenant at the start of a lease to provide financial protection for the landlord if the tenant violates lease terms. Landlords can use security deposits to cover unpaid rent, property damage beyond normal wear and tear, and other costs. 

New Mexico has specific statutes that govern security deposits for residential and commercial rental properties in the state. These laws outline the rights and responsibilities of tenants and landlords when it comes to security deposits.

The purpose of New Mexico's security deposit laws is to ensure fair treatment for both parties. The laws limit how much a landlord can charge for a deposit, where deposits must be stored, allowable deductions, and penalties for violations. Key provisions in New Mexico law include deposit caps, mandated interest payments, inspection requirements, and statutory time limits for returning deposits after lease termination.

This guide will provide an overview of the most important security deposit laws and regulations in New Mexico that renters should know. Understanding your rights as a tenant can help ensure you receive a fair return of your deposit at the end of your lease.

Maximum Security Deposit Amount

New Mexico law limits how much a landlord can charge for a security deposit. For unfurnished rental units, the maximum security deposit a landlord can require is equal to one month's rent. However, for furnished rentals there is no limit on the security deposit amount a landlord can charge. 

The security deposit limit applies on a per-dwelling basis. If a tenant rents multiple units from the same landlord, the landlord can collect up to 1 month's rent for each separate dwelling unit. For example, if a tenant rents 2 apartments that each have monthly rent of $1000, the landlord can collect up to $1000 as a security deposit for each unit, for a total of $2000.

The security deposit limit applies to the total amount collected as a security deposit and does not include other fees like pet deposits or cleaning fees. Landlords are permitted to charge reasonable pet deposits and other fees in addition to the security deposit.

Where Landlords Must Store the Security Deposit

Landlords in New Mexico are required to store security deposits in federally insured and state regulated financial institutions such as banks and credit unions. This ensures that the deposits are protected in case the financial institution fails. 

Additionally, New Mexico law prohibits landlords from commingling security deposits with their own funds, such as a personal checking or savings account. Instead, deposits must be kept in a separate escrow account used only for holding tenants' security deposits. Commingling deposits with a landlord's personal money is illegal.

The purpose of these laws is to prevent a landlord from spending the deposit money for their own use. Requiring separate escrow accounts reduces the risk of landlords improperly withholding deposits at the end of a lease.

Charging Pet Deposits

Landlords in New Mexico are permitted to charge reasonable pet deposits in addition to standard security deposits. Unlike security deposits, pet deposits may be designated as nonrefundable fees.  

There is no set limit on pet deposit amounts under New Mexico law. Landlords have discretion to charge a pet deposit they deem reasonable based on factors like the size of the pet, potential risks of property damage, and costs to clean up after the animal. Typically pet deposits range from $200 to $500.   

Pet deposits are meant to cover any damages or extra wear and tear specifically attributable to the tenant's pet. For example, if the pet scratches the floors, damages the carpet, or soils the yard, the landlord can use the pet deposit to pay for repairs and restoration.

Since pet deposits are separate from standard security deposits, they do not need to be refunded at the end of the lease if no pet damages occur. However, landlords cannot simply keep the pet deposit if there are no documented pet-related expenses. In that case, the unused portion of the pet deposit would likely have to be refunded to the tenant.

Pet deposits give landlords some financial protection from irresponsible pet owners. Meanwhile, responsible pet owners feel assured they won't lose their standard security deposit to normal pet-related issues like hair, dander or nose marks on the windows.

Allowable Deductions 

Landlords in New Mexico can legally deduct from the security deposit for unpaid rent, damage beyond normal wear and tear, unpaid utilities, and costs to re-rent the unit after early lease termination.

Unpaid Rent

If the tenant fails to pay rent as required by the lease agreement, the landlord can use the security deposit to cover the unpaid rent. This includes using the deposit for rent owed during the lease term or at the end of the tenancy.

Damage Beyond Normal Wear and Tear 

Landlords can deduct from the security deposit to repair or fix any damages caused by the tenant or guests that exceed normal wear and tear. This includes damages like broken windows, damaged floors, holes in the walls, or stains on the carpeting. Normal wear and tear would not allow deductions.

Unpaid Utilities

If the tenant fails to pay any utilities they were responsible for per the lease, such as electricity, gas, or water bills, the landlord can use the security deposit to cover these costs. Proper notice is required prior to deduction.

Costs to Re-rent After Early Termination

If the tenant ends the lease early, the landlord can deduct from the security deposit any costs incurred to re-rent the unit, such as advertising fees or other costs to find a new tenant. The landlord must make reasonable efforts to re-rent quickly.

Inspection Requirements

There is no New Mexico law requiring a landlord to do a move-in or move-out inspection of the rental unit when a tenant moves in or out. However, it is strongly recommended that landlords perform thorough inspections at both the start and end of the lease. 

Documenting the condition of the unit at move-in through photos, video, or a signed inspection report gives the landlord evidence to back up any claims of damages against the security deposit. It also protects the tenant from being charged for pre-existing damages.

Likewise, doing a move-out inspection allows the landlord to identify any new damages for which they may deduct from the deposit. The tenant also benefits from having the opportunity to do their own inspection at move-out and address any issues to avoid unfair deductions.

While not legally mandated, move-in and move-out inspections are considered best practices for landlords in New Mexico. They create transparency for both parties and minimize disputes over the security deposit return. Some leases may require inspections, so tenants should review their lease and ask about inspection procedures before moving in.

Returning the Deposit

New Mexico law requires landlords to return security deposits within 30 days after the termination of a lease or rental agreement. The 30 days begins once the tenant has fully vacated the unit and returned the keys to the landlord. 

When returning a security deposit, landlords must also provide tenants with a written statement detailing any deductions taken from the deposit. This statement should clearly itemize any amounts withheld, along with explanations for the deductions. For example, if a landlord withholds $250 for carpet cleaning, the statement should say something like:

  • Carpet cleaning and repair - $250

The itemized deductions statement provides transparency to tenants on why their deposit is not being returned in full. It also gives tenants the opportunity to dispute any improper deductions before the landlord deducts them.

If a landlord fails to return the deposit or provide a statement within 30 days, the tenant has grounds to take legal action to recover the improperly held deposit. The landlord may be liable for double the amount wrongfully withheld, plus the tenant's court and attorney fees.

It is crucial for New Mexico landlords to properly handle security deposits and follow the laws regarding timely return. Mishandling deposits is one of the most common sources of disputes between landlords and tenants. Providing prompt refunds and detailed statements can help avoid deposit-related conflicts.

Consequences for Not Returning the Deposit 

Landlords who wrongfully withhold a security deposit from a tenant can face serious legal consequences in New Mexico. Under state law, if a landlord fails to return the full security deposit, provide proper notice of deductions, or return it within 30 days after the lease ends, the tenant has the right to sue.

If a tenant sues over a wrongfully withheld security deposit and wins, the court can award the tenant up to twice the amount of the deposit. So if a landlord improperly kept a $1000 deposit, the tenant could be awarded $2000 by the court. This penalty is designed to deter landlords from unlawfully keeping deposits.

On top of double damages, a court can also make the landlord pay for the tenant's attorney fees related to the case. Having to cover legal costs serves as an additional deterrent for landlords against violating security deposit laws. Tenants whose deposits were wrongfully withheld should consider consulting a lawyer, as the threat of having to pay attorney fees may convince the landlord to promptly return the deposit before a lawsuit is even filed.

By clearly spelling out these severe penalties, New Mexico aims to compel landlords to properly handle security deposits and return them in full when required. Tenants who believe their deposit was unlawfully kept can seek legal help to recover double their money, plus attorney fees.

Selling the Property

When a rental property is sold in New Mexico, the responsibility for handling the tenants' security deposits transfers to the new owner. The seller must transfer the full security deposit amounts for all tenants to the buyer at the time of sale. 

The new owner assumes all liability for returning the tenants' security deposits, including any disputed deductions and consequences for failing to return the deposits properly. The new landlord steps into the shoes of the previous landlord and takes over the legal obligations regarding security deposits.

Tenants do not need to pay new security deposits or move out when their rental unit is sold. Their original security deposit transfers to the new owner. The terms of the lease also transfer to the new owner. 

Sellers in New Mexico must provide an accounting of all security deposit funds and transfer those funds to the buyer at closing. The purchase agreement typically specifies the transfer of deposits. Sellers who fail to transfer the full security deposit amounts to the buyer at sale could face legal liability.

Statute of Limitations

In New Mexico, tenants have one year from the termination of their lease to take legal action if the landlord wrongfully withholds all or part of the security deposit. This statute of limitations is outlined in New Mexico Statutes Chapter 47, Article 8

The one-year limit applies specifically to security deposit disputes. Tenants cannot wait longer than a year to sue a landlord for improper deductions or failure to return the deposit in a timely manner. After one year passes, the tenant loses the right to pursue legal action and recover their security deposit funds.

This relatively short statute of limitations gives tenants incentive to act promptly if they believe the landlord mishandled the deposit. Waiting longer than a year essentially waives the tenant's ability to dispute the landlord's actions in court. 

Some key points about New Mexico's statute of limitations for security deposit disputes:

  • The one-year limit starts running on the date the tenancy ends, not when the landlord returns or fails to return the deposit.
  • The statute applies to all legal remedies, including small claims suits and formal lawsuits.
  • If the landlord never returned the deposit, the tenant has one year from move-out to sue.
  • Partial withholding also must be disputed within one year.
  • Tenants should send a demand letter and gather evidence quickly after move-out.
  • Landlords cannot benefit if they intentionally delay past the one-year mark.

By understanding the one-year statute of limitations, both landlords and tenants can protect their rights in security deposit disputes. This time limit encourages prompt action while providing fair opportunity to recover wrongfully withheld deposits.

Frequently Asked Questions

What are the deposit laws in New Mexico?

In New Mexico, the security deposit laws state that landlords can charge no more than one month's rent for leases that are less than one year. If the lease is longer than a year, the landlord can charge more than this amount. Landlords must return the deposit within 30 days of the tenant vacating the property, along with an itemized statement of any deductions.

What is considered normal wear and tear in New Mexico?

Normal wear and tear in New Mexico includes minor and reasonable wear that occurs from the normal use of the rental property. This might include fading paint, small scratches or dents in walls or floors, and worn carpeting. It does not include damage from negligence, abuse, or accidents by the tenant.

What are my rights as a tenant in New Mexico?

As a tenant in New Mexico, you have rights to a habitable living environment, the right to be informed in writing of any changes in lease terms, protection against landlord retaliation for exercising your legal rights, and the right to privacy, meaning your landlord must provide notice before entering your rental unit. You also have the right to withhold rent or repair and deduct if necessary repairs are not made.

What is the statute 47-8-18 in New Mexico?

Statute 47-8-18 in New Mexico is part of the Uniform Owner-Resident Relations Act. It specifically details the handling and return of security deposits. This statute requires landlords to return a tenant's security deposit within 30 days after the end of tenancy, less any lawful deductions for damages, unpaid rent, or other amounts legally owed to the landlord under the lease agreement.

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