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Iowa Security Deposit Law Explained | What Are An Iowa Landlord’s Security Deposit Obligations?

Article written by Attorney Kevin O'Flaherty
Updated on
June 29, 2020

In this article, we discuss an Iowa landlord’s security deposit obligations, the rules for storing Iowa security deposits, Iowa security deposit interest and deductions, returning an Iowa security deposit, and what happens if the property is transferred to a new landlord?

Security deposit rights as defined in Iowa’s landlord-tenant law exist to provide protection for both the landlord and the tenant. The law provides landlords with the right to collect a security deposit from their tenants in addition to the normal monthly rent. This security deposit provides the landlord with peace of mind that she will be able to cover any unexpected damages to the property by the tenant. 

The tenant understands that if she leaves the property in the same shape as it was when it was first rented to the tenant, they will have her security deposit returned at the end of the lease. Iowa is one of many states in the US that does not require providing a tenant with a written receipt after receiving the tenant’s security deposit.

Iowa Security Deposit Limits

In Iowa, a landlord can collect a maximum of two months’ rent for a security deposit. That means if an apartment normally costs $1000 per month, the security deposit can be as high as $2000. This deposit will typically need to be paid along with the first month’s rent before the tenant moves in. This limit is the Iowa statewide limit; different municipalities may have their own additional fees or rules. 

How Must a Landlord Store a Tenant’s Security Deposit?

A landlord should assume that she will be paying the security deposit back to the tenant when the tenant moves out, minus any damages, any withholding of security deposits for reasons other than damages or clauses specified in the contract is unlawful. For this reason, the landlord must keep security deposits in a separate account, such as a savings account, loan association, or credit union. The security deposit account cannot contain funds for anything other than security deposits.

Can Iowa Security Deposits Gain Interest?

Iowa security deposits are not required to gain interest, but any interest gained by an Iowa security deposit account is the landlord’s property for the first five years of tenancy.

When Can An Iowa Landlord Deduct Money From a Security Deposit

A security deposit remains the property of the tenant even though it is in the landlord’s bank account, and it should not be assumed the landlord will deduct money from a tenant’s security deposit. Responsible tenants can rest easy knowing that they should have no problems recouping their security deposit at the end of the lease. However, there are a handful of reasons that legally allow the landlord to deduct money from the tenant’s security deposit.

  • Damages to the unit while under the tenancy of the tenant beyond normal wear and tear;
  • The landlord can use funds from the security deposit to cover unpaid rent;
  • Any costs incurred by the landlord in the process of removing and recovering a unit that a tenant has refused to vacate;
  • Any other breaches of the lease agreement that legally warrant the landlord deducting money from the tenant’s security deposit.

Returning an Iowa Tenant’s Security Deposit

Generally, an Iowa landlord must return a tenant’s security deposit within 30 days after receiving the tenant’s forwarding address. The tenant has up to one year to provide the landlord with a forwarding address to which to send the security deposit. If the tenant fails to provide the landlord with a forwarding address within one year the security deposit becomes the property of the landlord. 

If the landlord makes any money deduction from a security deposit, a written itemized statement must be provided that includes the type of damage and the approximate cost of repair. Withholding a security deposit for more than 30 days after receiving the forwarding address and directions from the tenant is unlawful and the landlord may be liable to pay actual damages, a maximum of $200 in punitive damage, as well as attorney and court fees.

What Happens If the Landlord Sells the Property?

If the ownership of the property is to be transferred the previous owner has two options for handling security deposits in Iowa. The first option is to transfer the security deposits to the new owner, minus any appropriate deductions. The landlord must communicate to the tenant the new landlord’s contact information, address, and the amount being transferred to the new owner. After receiving the notification of the transfer of the security deposit the tenant has 20 days to contest the transfer or it will be allowed to proceed. The second option is for the landlord to return the security deposit to the tenant, minus any appropriate deductions.

If you’re a tenant and feel your landlord is withholding money owed to you or you’re a landlord who is considering taking legal action against their tenant, it’s important to have an experienced attorney guiding your case. For any questions please don’t hesitate to give us a call at 630-324-6666.

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Iowa Security Deposit Law Explained | What Are An Iowa Landlord’s Security Deposit Obligations?

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