South Dakota Security Deposit Laws: 2024 Updates

South Dakota updated its security deposit return timelines in 2024. Property owners must now adhere to a unified 21-day deadline for residential properties, while commercial properties follow a separate 60-day track.

Residential Security Deposits

1. The One-Month Cap (SDCL § 43-32-6.1)

The standard security deposit for a residential unit cannot exceed one month's rent.

• Exception: A higher deposit is permitted if "special conditions" exist that pose a danger to the premises (e.g., pets or elevated wear-and-tear risks). These conditions should be clearly documented in the lease.

2. The 21-Day Return Rule (2024 Update)

As of July 1, 2024, the timeline for returning a residential security deposit has been simplified:

• Unified Deadline: The landlord must return the deposit (or the balance) within 21 days after the tenancy terminates.
• Itemization: If any portion is withheld for damages or unpaid rent, a written, itemized statement must be sent within this same 21-day window. The previous 45-day extension for itemization has been repealed for residential tenancies.

Commercial Security Deposits (SDCL § 43-32-6.2)

Commercial property owners operate under different statutory timelines:

• No Statutory Cap: There is no legal limit on the amount of a commercial security deposit.
• 60-Day Return: The landlord has 60 days after the tenant vacates to return the deposit.
• 90-Day Itemization: If requested by the tenant, the landlord must provide an itemized list of deductions within 90 days.

Allowable Deductions

In both residential and commercial tenancies, landlords may deduct for:

• Unpaid Rent: Any balance due at the end of the term.
• Damages: Costs to repair damage beyond "normal wear and tear."
• Cleaning: Costs to restore the unit to its move-in cleanliness level.

Penalties for Late Return

If a residential landlord misses the 21-day deadline:

• Forfeiture: They automatically forfeit the right to withhold any portion of the deposit for damages (SDCL § 43-32-24).
• Civil Liability: The tenant may sue in small claims court for the full return of the deposit.

Best Practices for Landlords

1. Request Forwarding Addresses: Do this during the move-out inspection. The 21-day clock starts when the tenancy ends, but you need an address to mail the check.
2. Document Everything: Use the Landager move-in/move-out checklist with photos to justify any deductions.
3. Handle Interest Properly: South Dakota law does not require you to pay interest on deposits, but many landlords use a separate escrow account as a best practice for organization.

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