Security Deposits in Tennessee: What the Statute Requires of Residential Landlords

Tennessee does not have one security deposit rule for the whole state. The detailed rules are in Tenn. Code Ann. § 66-28-301, and that section only reaches property in counties covered by the Uniform Residential Landlord and Tenant Act. Where it applies, the statute is specific about the account, the move-out inspection, and the damage listing, and it is silent on some things landlords often assume it covers, such as a fixed return deadline.

Which law applies

The Act applies only in counties with a population of more than 75,000, according to the 2010 federal census (Tenn. Code Ann. § 66-28-102(a)). The statute used to add "or any subsequent federal census," but a 2021 public chapter deleted those words effective July 1, 2021 (2021 Tenn. Pub. Ch. 182), so the county line is tied to the 2010 count. Section 66-28-301 is part of the Act, so its deposit rules follow the same county line. Even inside a covered county, the Act does not govern certain arrangements unless they were set up to avoid it, such as occupancy under a contract to buy the property, transient hotel or motel stays, and agricultural rentals (§ 66-28-102(c)). Public and other HUD-regulated housing owned by a government entity or nonprofit is outside the Act to the extent federal regulation conflicts with it (§ 66-28-102(d)).

Outside the covered counties, I have not found a statute in Title 66 of the Tennessee Code that sets general rules for residential security deposits. In those counties, the lease and general contract law do most of the work, which is why the lease's deposit terms matter so much there. The county question is also the first thing that shapes how an eviction is handled.

What counts as a security deposit

The Act defines a security deposit as an escrow payment made to the landlord under the rental agreement to secure the landlord against financial loss due to damage to the premises caused by the tenant's occupancy, other than ordinary wear and tear, and any monetary damage due to the tenant's breach of the rental agreement (§ 66-28-104).

The Act does not address fees a lease labels nonrefundable, and I am not aware of a Tennessee appellate decision deciding when such a charge is treated as a deposit. Because the definition turns on what the payment is for, the label alone may not settle the question.

The account and the notice at signing

A landlord of residential property who requires a security deposit before occupancy must deposit all tenants' deposits in an account used only for that purpose, at a bank or other lending institution regulated by the state or a federal agency (§ 66-28-301(a)). When the tenant signs the lease and pays the deposit, the landlord must tell the tenant where that account is located, though not the account number (§ 66-28-301(h)).

• Interest: § 66-28-301 does not require the landlord to pay interest on the deposit, and I did not find another provision in the Act that does.
• Move-in condition: the statute does not require a move-in inspection or a move-in condition report. Many leases use one anyway, and it can be useful evidence of what changed during the tenancy.
• Selling the property: a landlord who conveys the property in a good faith sale to a bona fide purchaser is relieved of liability under the rental agreement and the Act for later events, unless otherwise agreed, after written notice to the tenant of the conveyance and the transfer of the deposit to the buyer (§ 66-28-305).
• Managed property: if a licensed firm holds the deposits, TREC's trust-account rules apply as well. Trust accounts in property management covers that side.

The move-out inspection

The tenant generally has the right to inspect the premises to determine the tenant's liability for damage that is the basis for any charge against the deposit (§ 66-28-301(b)). The statute lays out the process:

1. When the landlord asks the tenant to vacate, or within five days after the landlord receives the tenant's written notice of intent to vacate, the landlord may notify the tenant of the right to be present at the inspection. The notice may say the tenant can request an inspection time set by the landlord during normal working hours (§ 66-28-301(b)(1)(A)).
2. The landlord may require the inspection to happen after the tenant has completely vacated and is ready to return all means of access, but the inspection must be on the day the tenant vacates or within four calendar days afterward (§ 66-28-301(b)(1)(A)).
3. If the tenant requests a mutual inspection, the landlord and tenant inspect together and compile a comprehensive listing of any presently ascertainable damage that is the basis for a charge against the deposit, with the estimated dollar cost of repair. Both sign it, and except as provided for later-discovered damage, their signatures are conclusive evidence of the listing's accuracy. A tenant who refuses to sign must state specifically in writing the items the tenant disputes (§ 66-28-301(b)(1)(B)).
4. If the landlord gave written notice of the right to be present and the tenant scheduled an inspection but did not attend, the tenant waives the right to contest the damages the landlord found, but only if notice of that waiver is set out in the rental agreement (§ 66-28-301(b)(1)(A)).

When the landlord inspects alone

The tenant has no right to inspect if the tenant vacated without written notice, abandoned the premises, was judicially removed, did not contact the landlord after the notice of the right to a mutual inspection, failed to appear at the arranged time, or did not request a mutual inspection or is otherwise inaccessible (§ 66-28-301(b)(2)(B)). In those cases, the landlord may inspect and compile the same kind of listing without the tenant, and must provide a written copy of the listing and estimated repair costs, sent by certificate of mailing, upon the tenant's written request (§ 66-28-301(b)(2)(A)).

The Act allows notices by email if the tenant gave an email address in the rental agreement, unless a provision requires a specific form of notice (§ 66-28-108). Because the landlord-only listing calls for a certificate of mailing, email alone may not satisfy that step.

Forfeiture: two conditions, not one

No landlord is entitled to keep any portion of a security deposit if the deposit was not placed in the required account and a listing of damages was not provided as subsection (b) requires (§ 66-28-301(c)). The statute joins the two conditions with and. Read as written, forfeiture under this subsection requires both failures.

That does not make the account requirement optional. A landlord who skips it is out of compliance with the statute, and, except as the Act otherwise provides, it lets a tenant recover damages, injunctive relief, and reasonable attorney's fees for a landlord's noncompliance with the rental agreement or any section of the Act after 14 days' written notice (§ 66-28-501(a)). How that general remedy fits with § 66-28-301(d), which limits a tenant's claim over the damage listing to the items the tenant disputed, is not settled. The Act also bars retaliating against a tenant who complains to the landlord about a § 66-28-301 violation (§ 66-28-514(a)(1)).

Two points here are not settled. I am not aware of a Tennessee appellate decision applying subsection (c), and the 2021 annotated code release I reviewed lists no court decisions under § 66-28-301. It is also unclear whether a landlord who inspects alone has provided a listing as required when the tenant never makes the written request that triggers the duty to send one.

Deadlines: what the statute does and does not say

Section 66-28-301 does not set a fixed number of days for returning a deposit or sending the damage listing. The time periods it does contain are these:

• Refund notice and 60 days: if the tenant leaves owing no rent and a refund is due, the landlord must send notice of the refund amount to the tenant's last known or reasonably determinable address. If the landlord receives no response within 60 days of sending it, the landlord may remove the deposit from the account and keep it free of any claim by the tenant (§ 66-28-301(f)).
• Later-discovered damage: the statute does not stop a landlord from recovering contractual damages, plus additional physical damage discovered after the inspection, but physical damage can be recovered only if it was discovered before the earlier of 30 days after the tenant vacated or abandoned the premises, or 7 days after a new tenant takes possession (§ 66-28-301(g)).

Section 66-28-301 also does not cap the amount of a deposit. A 2024 bill would have added a cap to it, limiting deposits to one month's rent, but it failed in a House subcommittee (HB 2025 / SB 1893, 113th General Assembly). I have not found a later public chapter, through 2026, that amended § 66-28-301.

Ordinary wear and tear versus damage

The statute's definition excludes ordinary wear and tear from what a deposit secures (§ 66-28-104), but the Act does not define the phrase, and I am not aware of a Tennessee appellate decision defining it for residential deposits. The Act's tenant duties give some framing. A tenant must keep the part of the premises the tenant occupies as clean and safe as it was when the tenant took possession, and must not deliberately or negligently destroy, deface, damage, impair, or remove any part of the premises or let anyone else do so (§ 66-28-401).

The practical issue is proof. The listing is limited to presently ascertainable damage with an estimated repair cost (§ 66-28-301(b)), and a tenant's later claim is limited to the items the tenant specifically disputed (§ 66-28-301(d)). Dated photographs, the move-in record if there is one, and invoices or estimates tied to each listed item are what make a charge defensible. In one 2020 case, the Court of Appeals affirmed a judgment that let a landlord apply the deposit to damage the tenants caused and recover additional damage above the deposit, relying on the lease and on §§ 66-28-104 and -301, among other sections (Dykes v. Okorie, No. M2019-01332-COA-R3-CV (Tenn. Ct. App. May 29, 2020)). The opinion does not discuss the deposit account, the inspection, or the damage listing.

Unpaid rent, abandonment, and eviction

If a tenant vacates with unpaid rent or other amounts due, the landlord may remove the deposit from the account and apply it to the unpaid debt (§ 66-28-301(e)). A tenant who disputes the final damage listing may sue in circuit or general sessions court, but the claim is limited to the items the tenant specifically dissented from; otherwise the tenant is not entitled to recover damages under § 66-28-301 (§ 66-28-301(d)).

• Abandonment: a tenant's unexplained or extended absence for 30 days or more without paying rent is prima facie evidence of abandonment. Nonpayment for 15 days past the due date, plus other circumstances showing the tenant has permanently left, can also be, but that route requires a posted and mailed notice and a 10-day wait (§ 66-28-405(a), (b)). A tenant who abandoned the unit has no right to the inspection, and the 30-day window for later-discovered damage runs from the date the tenant vacated or abandoned (§ 66-28-301(b)(2)(B), (g)(1)).
• After an eviction: a tenant who was judicially removed has no right to the inspection, so the landlord-only listing process applies (§ 66-28-301(b)(2)(B)(iii), (b)(2)(A)). The landlord may recover reasonable attorney's fees for breach of contract and nonpayment of rent as provided in the rental agreement (§ 66-28-505(d)).
• Lockouts: if a landlord unlawfully removes or excludes a tenant, or willfully diminishes services by interrupting essential services provided under the rental agreement, the tenant may recover possession or terminate the rental agreement. If the agreement is terminated under that section, the landlord must return all prepaid rent and security deposits (§ 66-28-504).
• No waiver by lease: a rental agreement cannot provide that the tenant waives rights or remedies under the Act (§ 66-28-201(a)).

Every deposit question turns on the county, the lease, and what was done at move-in and move-out. If you are a landlord sorting out a deposit, a damage listing, or a tenant's challenge, my office can review the lease and the move-out file with you.

Educational disclaimer: This article provides general Tennessee educational information only and is not legal advice for any specific lease, deposit, or dispute.