New Mexico Security Deposit Laws: Rules for Long and Short-Term Leases

New Mexico's Uniform Owner-Resident Relations Act (UORRA) dictates specific rules for the collection, handling, and return of residential security deposits. Understanding the distinction between leases under and over one year is crucial for compliance.

Disclaimer: This guide provides general legal information for educational purposes only and does not constitute legal advice. Always consult a qualified New Mexico attorney. Information last verified: March 2026.

Maximum Security Deposit Limits

Unlike many states with a flat cap, New Mexico's security deposit limit depends on the duration of the lease agreement:

Leases Less Than One Year (or Month-to-Month)

For a rental agreement of less than one year, the landlord may demand a security deposit that is no more than one month's rent.

Leases of One Year or Longer

For a lease term of one year or more, there is no statutory maximum limit on the deposit amount (it simply must be "reasonable").

• The Interest Catch: If a landlord charges a deposit that is greater than one month's rent on a lease of a year or more, the landlord must pay the tenant annual interest on the entire amount of the deposit.
• The interest rate must equal the passbook interest rate permitted to savings and loan associations in the state. Interest must be paid annually to the tenant.

Because of the administrative burden of tracking and paying interest, the vast majority of New Mexico landlords choose to cap deposits at one month's rent, regardless of the lease length.

Return of the Security Deposit

Landlords must adhere to a strict timeframe when returning a security deposit:

• Deadline: Within 30 days after the termination of the rental agreement or the tenant's departure, whichever is later.
• Forwarding Address: The landlord's obligation to return the deposit within 30 days only applies if the tenant provides a forwarding address.

Permissible Deductions

Landlords may deduct funds from the security deposit for:

• Unpaid rent.
• Unpaid utilities that were the tenant's responsibility.
• Actual damages to the unit caused by the tenant or their guests, excluding normal wear and tear.

If deductions are made, the landlord must provide an itemized written statement detailing the deductions alongside the remaining deposit balance within the 30-day window.

Penalties for Non-Compliance

If a landlord fails to provide the written itemized statement and the remaining deposit within 30 days:

1. Forfeiture: The landlord forfeits the right to keep any portion of the deposit, regardless of the damage to the unit.
2. Damages: The landlord forfeits the right to sue the tenant independently for damages to the premises.
3. Financial Penalty: The tenant can sue the landlord in court. If the landlord acted in "bad faith," they may be liable for a civil penalty of $250, plus the full deposit amount, plus reasonable attorney's fees and court costs.

How Landager Helps

Managing the 30-day deadline is the most common pitfall for New Mexico landlords. Landager automates this process by sending alerts 15 and 25 days post-move-out, and generates compliant, itemized deduction statements that clearly delineate between damage and normal wear and tear, protecting you from $250 bad-faith penalties.

Back to New Mexico Landlord-Tenant Laws Overview.