A. An owner is permitted to demand from the resident a reasonable deposit to be applied by the owner to recover damages, if any, caused to the premises by the resident during his term of residency.

(1) Under the terms of an annual rental agreement, if the owner demands or receives of the resident such a deposit in an amount greater than one month's rent, the owner shall be required to pay to the resident annually an interest equal to the passbook interest permitted to savings and loan associations in this state by the federal home loan bank board on such deposit.

(2) Under the terms of a rental agreement of a duration less than one year, an owner shall not demand or receive from the resident such a deposit in an amount in excess of one month's rent.

B. It is not the intention of this section to include the last month's prepaid rent, which may be required by the rental agreement as a deposit as defined in Subsection D [E] of Section 47-8-3 NMSA 1978. Any deposit as defined in Paragraph (1) of Subsection A of this section shall not be construed as prepaid rent.

C. Upon termination of the residency, property or money held by the owner as deposits may be applied by the owner to the payment of rent and the amount of damages which the owner has suffered by reason of the resident's noncompliance with the rental agreement or Section 47-8-22 NMSA 1978. No deposit shall be retained to cover normal wear and tear. In the event actual cause exists for retaining any portion of the deposit, the owner shall provide the resident with an itemized written list of the deductions from the deposit and the balance of the deposit, if any, within thirty days of the date of termination of the rental agreement or resident departure, whichever is later. The owner is deemed to have complied with this section by mailing the statement and any payment required to the last known address of the resident. Nothing in this section shall preclude the owner from retaining portions of the deposit for nonpayment of rent or utilities, repair work or other legitimate damages.

D. If the owner fails to provide the resident with a written statement of deductions from the deposit and the balance shown by the statement to be due, within thirty days of the termination of the tenancy, the owner:

(1) shall forfeit the right to withhold any portion of the deposit;

(2) shall forfeit the right to assert any counterclaim in any action brought to recover that deposit;

(3) shall be liable to the resident for court costs and reasonable attorneys' fees; and

(4) shall forfeit the right to assert an independent action against the resident for damages to the rental property.

E. An owner who in bad faith retains a deposit in violation of this section is liable for a civil penalty in the amount of two hundred fifty dollars ($250) payable to the resident.

History: 1953 Comp., § 70-7-18, enacted by Laws 1975, ch. 38, § 18; 1985, ch. 146, § 2; 1989, ch. 340, § 2.

Bracketed material. — The bracketed material was inserted by the compiler and is not part of the law. Subsection D of 47-8-3 NMSA 1978 was redesignated Subsection E by Laws 1999, ch. 99, § 1.

The 1989 amendment, effective June 16, 1989, in Subsection D, added Paragraph (4); and added Subsection E.

The 1985 amendment substituted "Section 47-8-3 NMSA 1978" for "Section 3 of the Uniform Owner-Resident Regulations Act" at the end of the first sentence and inserted "of Subsection A" following "Paragraph (1)" in the second sentence of Subsection B, substituted "Section 47-8-22 NMSA 1978" for "Section 22 of the Uniform Owner-Resident Relations Act" at the end of the first sentence, deleted the former second sentence, relating to delivering the balance of the deposit and prepaid rent to the resident, and added the second, third, and fourth sentences of Subsection C and deleted the former provisions of Subsection D which read as set out in the 1982 Replacement Pamphlet.

Duty to provide list of damages. — When the landlord failed to provide her tenant with an itemized list of damage deductions as required by Subsection C, she forfeited her right to withhold any portion of the deposit or to file suit for damages as provided by Subsection D, and the tenant was entitled to an award of attorney's fees. Garcia v. Thong, 1995-NMSC-030, 119 N.M. 704, 895 P.2d 226.

Itemization not required when deposit used to cover deficient rent. — A landlord was entitled to apply the security deposit to the tenant's deficient rent payment without sending a written itemization. Bruce v. Attaway, 1996-NMSC-030, 121 N.M. 755, 918 P.2d 341.

Unreasonable deposit. — The tenants' $50,000 was not a security deposit, and therefore there could be no interest due on it and no conversion as a matter of law; a deposit under the statute was required to be reasonable and most deposits were limited to one month's rent, or, if not, be somewhat greater, but not by a multiple of 32. Hedicke v. Gunville, 2003-NMCA-032, 133 N.M. 335, 62 P.3d 1217, cert. denied, 133 N.M. 413, 63 P.3d 516.

Law reviews. — For survey, "The Uniform Owner-Resident Relations Act," see 6 N.M.L. Rev. 293 (1976).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 49 Am. Jur. 2d Landlord and Tenant § 119 et seq.

Landlord and tenant: violation of statute or ordinance requiring landlord to furnish specified facilities or services as ground of liability for injury resulting from tenant's attempt to deal with deficiency, 63 A.L.R.4th 883.

Landlord-tenant security deposit legislation, 63 A.L.R.4th 901.

52 C.J.S. Landlord and Tenant §§ 472(1) to 476.