Tennessee Security Deposit Laws: No Cap, the Separate-Account Rule, and the Signed Damage List

Tennessee security deposit law is different from most states in two ways that trip up landlords and tenants alike. First, there is no statutory cap on the deposit amount — what the law regulates is not how much you collect but how you hold and return it. Second, the rules that matter most — the separate-account requirement, the move-out inspection, and the signed damage list under Tennessee Code section 66-28-301 — are part of the Uniform Residential Landlord and Tenant Act, which by its own terms applies only in the state’s larger counties. This guide walks the whole Tennessee framework end to end: where the Act applies, how the deposit must be held and disclosed, what you may and may not deduct, the inspection-and-itemization process, the sixty-day rule, and the forfeiture a landlord faces for cutting corners.

Before you rely on any single rule below, it helps to know the one fact that reshapes everything: Tennessee’s deposit statute lives inside a chapter of the code that does not apply statewide. In a large county it governs in full; in a small county the common law and your lease govern instead. That jurisdictional line is explained first, because it decides whether the rest of this page is binding law or best practice for your particular unit. Everything here is general information, not legal advice; confirm the current figures and consult a licensed Tennessee attorney before acting on a specific dispute.

Below, a short overview video summarizes the Tennessee deposit rules; the sections that follow break down each piece in detail — where the Act applies, the separate account and its disclosure, deductions versus normal wear and tear, the inspection and signed list, the sixty-day rule, the absence of any interest requirement, the move-out sequence, and the general sessions court path if a dispute cannot be resolved.

The single most important thing to understand about Tennessee deposit law is a jurisdictional one, and most guides skip it entirely. The deposit statute, Tennessee Code section 66-28-301, is part of the Uniform Residential Landlord and Tenant Act — Tennessee Code Title 66, Chapter 28. That Act does not apply everywhere in the state. Under Tennessee Code section 66-28-102, the Act governs only in counties with a population greater than seventy-five thousand according to the 2010 federal census. In a county over that threshold, the deposit rules described on this page are binding law. In a county at or below the threshold, the Act simply does not apply, and the tenancy is governed instead by the common law and by whatever the lease itself says.

Why This Matters in Practice

Even where the Act does not technically apply, following its procedure is sound practice, because a well-drafted lease can adopt the same steps by contract and a court will hold both sides to what the lease says. But the legal consequences differ. In a covered county, a landlord who fails to keep the deposit in a separate account and fails to provide the required damage list can be barred by statute from retaining any of the deposit. In a non-covered county, the tenant’s remedy flows from the lease and the common law rather than from Tennessee Code section 66-28-301. Knowing which regime applies to your unit is the first step in every Tennessee deposit question.

Unlike many states, Tennessee places no statutory cap on the amount a landlord may collect as a security deposit. Tennessee Code section 66-28-301 does not set a maximum, so the amount is left to the market and the lease. In practice, Tennessee landlords typically collect the equivalent of one to two months’ rent, with premium or single-family units sometimes at the higher end and separate pet deposits common. Because there is no cap, the deposit amount is rarely the legal battleground — the fights are almost always about how the deposit was held and whether it was returned correctly.

The Separate-Account Requirement

Where the Act applies, Tennessee Code section 66-28-301 requires a landlord who takes a security deposit to deposit all tenants’ security deposits in an account used only for that purpose, at a bank or other lending institution regulated by the state or the federal government. This is a genuine legal obligation, not merely a best practice: commingling deposits with operating funds violates the statute. The account does not have to bear interest, and the landlord generally keeps any interest it earns, but it must be a segregated deposit account.

The Duty to Disclose the Account Location

The statute adds a disclosure duty that landlords often overlook. Under Tennessee Code section 66-28-301, the landlord must notify the tenant of the location of the account at the time the tenant signs the lease and submits the deposit. It is not enough to hold the deposit correctly; the tenant is entitled to be told where it is held. Building this disclosure into the lease or a signed deposit receipt is the clean way to satisfy the requirement and to have proof you did.

The deposit exists to protect the landlord against specific, provable losses, and the landlord bears the burden of justifying each deduction. Anything a landlord cannot document is presumed to be the landlord’s own cost to absorb. Tennessee draws the usual line between real damage and the ordinary deterioration of a unit that is simply lived in.

Permitted Deductions

• Unpaid rent. Rent still owed for the final month or any earlier period. Tennessee Code section 66-28-301 lets the landlord apply the deposit to unpaid rent or other amounts the tenant owes.
• Physical damage beyond normal wear and tear. Holes in walls, broken fixtures, missing items, pet-stained flooring, and similar damage the tenant or the tenant’s guests caused.
• Unpaid utilities. Utility charges the landlord was forced to cover because the tenant did not pay them.
• Cleaning beyond routine turnover. The reasonable cost of cleaning that goes beyond ordinary turnover — smoke damage, pet contamination, or unusual filth — not a blanket charge to make an already-clean unit spotless.
• Lease-specified charges. Specific charges the lease allows, such as unreturned-key fees or agreed cleaning charges, where those charges are genuine and not a disguised charge for wear and tear.

Not Deductible — Ordinary Wear and Tear

Ordinary wear and tear is the natural deterioration that comes from normal use, and the landlord must absorb it. Tennessee courts treat the following as non-deductible in the ordinary case:

• Faded or lightly scuffed paint and small nail holes from hanging pictures.
• Carpet worn thin along walkways from ordinary foot traffic, with no stains or pet damage.
• Minor marks, loose grout, or caulk that has aged around tubs and sinks.
• Worn but still-functioning appliances and fixtures that simply reached the end of their useful life.

Where the Uniform Residential Landlord and Tenant Act applies, Tennessee builds the deposit return around an inspection and a written, signed list of damages — and this is the part of the statute that gives a diligent landlord the strongest protection. Under Tennessee Code section 66-28-301, the tenant has the right to inspect the premises to determine the tenant’s liability for physical damage, and the landlord must give the tenant the chance to be present when the inspection is done.

The Timing of the Inspection

The inspection is meant to happen at or right after surrender. Under Tennessee Code section 66-28-301, the inspection is to occur either on the day the tenant completely vacates the premises or within four calendar days after the tenant vacates. The landlord should give the tenant reasonable notice of the right to be present so a joint walkthrough can be arranged rather than a one-sided inspection the tenant never sees.

The Comprehensive, Signed Listing

When a mutual inspection is requested, the landlord and tenant together compile a comprehensive listing of any presently ascertainable damage that is the basis for a charge, along with the estimated dollar cost of repairing each item. Both the landlord and the tenant then sign the listing. This signature step matters enormously: under Tennessee Code section 66-28-301, the signatures of the landlord and tenant on the listing are conclusive evidence of the accuracy of the listing. A properly signed list is very hard for either side to reopen later.

Tennessee’s return mechanism is less about a single countdown clock and more about a process the landlord must run. After the inspection and any signed listing, the landlord applies the deposit to unpaid rent or documented damage and returns the balance to the tenant with the itemization. Under Tennessee Code section 66-28-301, if the tenant vacates owing rent or other amounts, the landlord may remove the deposit from the account and apply the money to that unpaid debt.

The Sixty-Day Rule for an Unresponsive Tenant

The statute contains an important protection that runs in the landlord’s favor. Under Tennessee Code section 66-28-301, if the landlord sends the required notification about the deposit and does not receive a response from the tenant within sixty days, the landlord may remove the deposit from the account and retain it free from any claim of the tenant or anyone claiming on the tenant’s behalf. This sixty-day rule is the mirror image of the forfeiture a non-compliant landlord faces: a tenant who ignores the landlord’s notice for sixty days can lose the right to the deposit, just as a landlord who ignores the account and itemization rules can be barred from keeping it.

No Interest Requirement

Tennessee imposes no requirement to pay interest on a security deposit. Tennessee Code section 66-28-301 requires a separate account used only for deposits, but it does not require that the account bear interest or that any interest be paid to the tenant. Unless the lease says otherwise, the landlord keeps whatever interest the account earns. This is a point where Tennessee is simpler than many states that mandate interest on deposits — but as always, verify the current law before relying on it.

Tennessee’s deposit rules carry a real consequence for the landlord who ignores them, and it is aimed squarely at the two handling rules at the heart of the statute. Under Tennessee Code section 66-28-301, no landlord is entitled to retain any portion of a security deposit if the deposit was not kept in an account as the statute requires and a listing of damages was not provided as the statute requires. In plain terms, a landlord who both fails to segregate the deposit and fails to give the tenant the required itemized damage list loses the right to keep any of the deposit — even for real, documented damage.

That is a powerful incentive to do the simple things right. The cost of holding the deposit in a separate account, disclosing its location, running the inspection, and handing over a signed list is trivial next to the cost of forfeiting the entire deposit because a court finds the handling rules were ignored. A tenant who is denied a proper accounting can bring the matter to court, and the landlord who cannot show compliance is in a weak position from the start.

Put the rules together and the Tennessee move-out becomes a repeatable checklist rather than a judgment call. Follow this sequence in a covered county and forfeiture exposure all but disappears.

A thorough move-out record starts at move-in. Use a documented Tennessee move-in and move-out checklist and photographs at both ends so you can prove exactly what the tenant caused. When you do withhold, a clean Tennessee security deposit itemization form keeps the statement organized, and a Tennessee security deposit return letter gives the tenant a clear accounting.

Tennessee has no separate “small claims court.” Deposit disputes are heard in the General Sessions Court, a forum designed to be used without a lawyer. As of 2026, the general jurisdictional limit for civil cases in General Sessions is twenty-five thousand dollars in most counties, which comfortably covers a deposit dispute. A handful of counties historically cap the limit lower — some sources put Anderson, Davidson, Hamilton, and Knox at a lower figure — and eviction and personal-property recovery cases have their own rules, so verify the current limit for the county where the unit sits before filing.

The pattern is consistent: Tennessee deposit cases are won on paper. The landlord who segregates the deposit, discloses the account, inspects on time, and hands over a signed itemized list rarely loses — and the tenant who keeps their own photos, the signed list, and a copy of the accounting is equally well positioned to recover a wrongful withholding.

Beyond a routine move-out, a few situations trip up Tennessee landlords because the deposit rules interact with other events. Three come up often.

When the Property Is Sold

If a landlord sells the rental, the deposit does not simply disappear from the picture. The soundest practice is to either transfer the remaining deposit (after any lawful application) to the new owner, with written notice to the tenant of the transfer and the new owner’s contact information, or return the remaining deposit directly to the tenant with a full accounting. A buyer of an occupied Tennessee property should confirm in escrow that deposits are transferred and documented, because a tenant’s claim to the deposit can follow the unit. Where the Uniform Residential Landlord and Tenant Act applies, the separate-account and disclosure duties continue under the new owner, so verify how the account is retitled at closing.

Roommates and a Single Deposit

Where several tenants share a lease and a single deposit, Tennessee treats the deposit as one sum tied to the tenancy, not as separate shares. When one roommate leaves and another stays, the landlord’s obligations are generally triggered when the tenancy as a whole ends and the unit is surrendered, not each time one roommate moves out mid-lease. Sorting out each roommate’s share of a refund is usually a private matter among the tenants. Return the single deposit to the tenants collectively unless the lease or a written agreement directs otherwise, and avoid being drawn into splitting it.

Pet Deposits and Assistance Animals

Because Tennessee sets no deposit cap, a separate pet deposit is common and lawful, and it is governed by the same return process as any other deposit money the lease treats as refundable. The important limit is federal and state fair-housing law: a landlord generally cannot charge a pet deposit or pet rent for a service animal or an emotional-support animal, because those are not pets in the eyes of the law. Screen the request for an assistance animal correctly rather than charging a deposit — our Tennessee pet and ESA laws guide walks through how to handle it.

Every rule above ultimately turns on proof. Tennessee places the burden on the landlord to justify each deduction, which means the landlord who cannot document a charge loses it — regardless of whether the damage was real. Build the evidence file across the whole tenancy, not at the end.

At Move-In

• A written condition checklist, room by room, signed and dated by the tenant.
• Timestamped photos or video of every wall, floor, fixture, and appliance, stored where the date cannot be doubted.
• A written note of any pre-existing wear, so it is never later charged to the tenant.
• A signed deposit receipt naming the charge a security deposit and stating the account’s location, satisfying the disclosure duty.

During the Tenancy

• A dated log of every maintenance request and the landlord’s response, which also rebuts a habitability defense — see Tennessee habitability laws.
• Records of any lawful entry to inspect or repair, made with proper notice under Tennessee landlord entry laws.

At Move-Out

• The signed, comprehensive list of damages with estimated repair costs.
• A second set of timestamped photos taken at surrender, to compare against move-in.
• Invoices, receipts, or a documented in-house cost for every charge.
• Proof that the itemized statement and any refund were mailed, using a tracked method.

The cheapest deposit dispute is the one that never happens. A few disciplined habits protect a Tennessee landlord across an entire portfolio.

• Segregate and disclose from the start. Hold every deposit in a separate account and disclose the account’s location in the lease or a signed receipt, satisfying Tennessee Code section 66-28-301 up front.
• Document move-in exhaustively. A signed checklist and dated photos of every room create the baseline that decides every future deduction.
• Offer and conduct the inspection. Give the tenant the chance to be present, walk the unit on the move-out day or within four days, and build the signed list together.
• Itemize with specifics. Every deduction gets a description, an amount, and a supporting invoice or documented cost — never a bare “cleaning” line.
• Return promptly and keep proof. Apply the deposit to real debts, return the balance with the accounting, and keep proof of mailing; verify any specific deadline for your county.
• Screen carefully before you ever hand over keys. The tenants most likely to leave a unit in disputed condition are often the ones a thorough screening would have flagged.

That last point is where most disputes are actually won — before the lease is ever signed. A prior eviction, a pattern of damage, or unstable finances rarely appears out of nowhere; it usually leaves a trail an applicant’s history reveals. Screening for it is the single highest-leverage habit a Tennessee landlord can build — see our guide to Tennessee tenant screening laws for the rules that govern it.

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