Indiana's Law on Landlord Security Deposit Returns With Interest

by Jill Stimson J.D. ; Updated July 27, 2017

Each state has the legal authority to enact and enforce its landlord and tenant laws. In Indiana, the landlord and tenant law was initially enacted in 1881. Until 2002, the Indiana landlord and tenant laws remained substantially similar to the laws enacted in 1881. However, in 2002, the Indiana Legislature amended Title 32 of the Indiana Code to clarify the respective rights between landlords and their tenants. Under the Indiana Code, landlords do not have to pay interest on their tenants' security deposits.

The Indiana Code covers landlord and tenant agreements made after June 30, 2002, and it does not cover purchase option leases giving tenants an “option to buy” after they rent. The Code does not set forth stringent requirements on landlords and only requires that landlords comply with their implied rights under common law. Under common law, all landlords have a duty to provide clean common areas, habitable housing that meets local housing and health codes and working electrical, mechanical and sanitation and plumbing systems, if provided.

Security Deposit Law

Under Indiana law, there is no limit to the amount a landlord can charge as an initial payment. Indiana law allows landlords to apply their deposits toward unpaid rent, damages beyond reasonable wear and tear and unpaid sewer or utility charges. Landlords who fail to comply with the Indiana Code’s security deposit rules can be required to refund the original fee in addition to legal fees and court costs.

Itemization

Under Indiana law, landlords can deduct from their tenants’ security deposits if they send them a written itemization of damages and associated charges. The Indiana Code allows landlords to estimate their repair costs if they send the itemization and any remaining fees to their tenants within 45 days after termination.

Return

A landlord must return his tenants’ security deposits within 45 days after tenants vacate property. Within 45 days, he must return the full amount or provide a written itemization of deductions. He must send his tenants any remaining amount after itemization. Landlords have a legal duty to return any remaining deposit by check or money order. If a landlord fails to return a tenant’s security deposit within 45 days or send a written itemization, the Code requires him to refund the entire original deposit without deductions. However, landlords are not liable for returning their deposits until their tenants provide a forwarding address. The 45-day period begins after they provide their forwarding address.

Considerations

Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

About the Author

Jill Stimson has worked in various property management positions in Maryland and Delaware. Stimson worked for the top three property management companies in the commercial industry and focuses her career on property building logistics and tenant relationships. She holds a Juris Doctor and a Bachelor of Science in psychology.