In North Dakota, the regulation of security deposits is governed by NDCC § 47-16-07.1, which applies to both "real property" (commercial) and "dwellings" (residential). While many states allow broad freedom of contract for commercial leases, North Dakota imposes specific statutory requirements on how commercial deposits are capped, held, and returned.

Contrary to common belief, commercial landlords in North Dakota are subject to statutory limits and must adhere to strict accounting and interest-bearing requirements if the tenancy exceeds nine months.

1. Statutory Deposit Caps

Under NDCC § 47-16-07.1, a lessor of real property may not demand or receive a security deposit exceeding one month's rent. However, the statute provides specific exceptions for individual tenants:

• Felony Incentive: A lessor may accept up to two months' rent as security from an individual convicted of a felony offense as an incentive to rent the property to that individual (NDCC § 47-16-07.1(1)(a)).
• Prior Judgments: A lessor may demand up to two months' rent as security from an individual who has had a judgment entered against them for violating the terms of a previous rental agreement (NDCC § 47-16-07.1(1)(b)).

Note that these exceptions apply specifically to natural persons ("individuals") and do not explicitly extend to corporate entities or entity principals.

2. Trust, Escrow, and Interest Requirements

North Dakota law requires commercial landlords to maintain security deposits in a specific manner:

• Interest-Bearing Accounts: The lessor must deposit security money in a federally insured interest-bearing savings or checking account for the benefit of the tenant (NDCC § 47-16-07.1(1)).
• Interest Payments: The deposit and any accrued interest must be paid to the lessee upon termination of the lease, provided the occupancy lasted at least nine months (NDCC § 47-16-07.1(3)).

3. Return Deadlines and Deductions

Commercial landlords must adhere to a strict statutory timeline for returning funds and providing documentation.

• 30-Day Deadline: The landlord must deliver or mail an itemized list of deductions and the remaining balance within 30 days after the termination of the lease and delivery of possession (NDCC § 47-16-07.1(3)).
• Allowable Deductions: Under NDCC § 47-16-07.1(3), a commercial lessor may apply the deposit and interest toward:
  • Any damages suffered due to deteriorations or injuries to the real property caused by the lessee's pet or through the negligence of the lessee or the lessee's guest.
  • Any unpaid rent.

Important Note on Cleaning: While residential landlords can deduct for cleaning and repairs necessary to return a dwelling to its original state (NDCC § 47-16-07.1(3)(c)), this specific provision is statutorily restricted to "dwelling units" and does not explicitly extend to commercial real property.

See our Commercial Maintenance ObligationsPreview unavailable guide.

How Landager Helps Commercial Landlords in North Dakota

Managing large commercial deposits—especially when commingling is legally permitted but practically dangerous—kills accounting efficiency. Landager provides enterprise-grade ledger separation without the banking fees. When you collect a $40,000 commercial deposit for a new North Dakota manufacturing facility, Landager securely logs the funds as a protected liability on your balance sheet, distinct from your operating revenue. When the multi-year lease concludes, the system instantly cross-references the tenant's exact lease to enforce your custom 60-day return window, compiling all unpaid late fees and outstanding CAM reconciliation charges into a flawless, itemized final disbursement statement.

Official Law Citation: This information is derived from N.D.C.C. § 47-16-07.1. For current statutes, visit the North Dakota Legislative BranchPreview unavailable.

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