Security deposits are a necessary part of the leasing arrangement. The deposit covers damages beyond normal wear and tear. New Mexico landlord tenant law dictates some of the steps you will need to take with the security deposit, so make sure to stay in compliance by knowing the law.
Amount of deposit and interest
The deposit amount in New Mexico depends on the length of the rental agreement term. For an agreement term that is less than one year only one month’s rent can be collected as a security deposit. For terms one year or greater the security deposit amount is not restricted to one month’s rent. In either case, any prepaid rent collected at the inception of the rental term may not be considered a security deposit.
In some cases the landlord must pay the tenant interest annually on the security deposit. If the security deposit is greater than one month’s rent the landlord must pay to tenant interest annually equal to the passbook interest permitted to savings and loan associations in New Mexico by the federal home loan bank board on such a deposit. Information about the interest requirement can be found by reading through NMSA 1978, § 47-8-18(A)(1).
Returning the security deposit
At the end of a tenancy the security deposit must be returned, and it’s a pretty simple process if the laws for returning a deposit in New Mexico are followed. To start, before moving out the tenant must provide a forwarding address to the landlord. The landlord then has 30 days after the agreement terminates and the premises has been surrendered to provide the tenant with an itemized written list of any deductions from the security deposit along with the balance of the deposit.
So, what happens if this simple procedure is not followed by the landlord? A whole lot of bad, in the way of forfeiture of the deposit. Per NMSA 1978, § 47-8-18(D), if the landlord fails to provide tenant with a written statement of deductions from the deposit and the balance to be returned within thirty days of the termination of the tenancy, the landlord faces the following consequences:
- Landlord must forfeit the right to withhold any portion of the deposit.
- Landlord forfeits the right to assert any counterclaim in any action brought to recover that deposit.
- Landlord is liable to tenant for court costs and reasonable attorneys’ fees.
- Landlord forfeits the right to assert an independent action against tenant for damages to the premises.
In addition, a landlord who in bad faith retains a deposit in violation of these statutes is liable for a civil penalty in the amount of $250, payable to the tenant. So, it’s clear that simply following the procedure for returning a security deposit can keep a landlord out of a good deal of pain.