As per New Mexico security deposit law, landlords in New Mexico have a right to ask for a security deposit from their tenants. The deposit acts as financial protection against negligent or careless tenant actions that could lead to financial hardship for the landlord.

A good example of such hardship is excessive rental property damage that exceeds normal wear and tear. As the landlord, the New Mexico security deposit rules state that you would be able to use part or all your tenant’s deposit to fix the damage.

Besides excessive damage to the rented unit, a security deposit can also help in other situations. Such as, if the tenant stops paying rent, moves out without clearing their utility bills, or breaks their lease without a legally justified reason.

Even though the state’s security deposit law is there to help New Mexico landlords, they also have several responsibilities. So, we at Blue Door Realty have put together this article to help all landlords understand the New Mexico security deposit law.

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Are There Security Deposit Limits?

Yes. New Mexico security deposit laws state that for leases less than a year, the most you can collect as a security deposit would be the equivalent of one month’s rent. But for leases that are longer than one year, you have the option to collect more.

Where Should You Store the Deposit?

As per New Mexico security deposit laws, the deposits should be kept in an interest-bearing bank account. But this rule only applies to leases that exceed a year. In this case, you will need to pay your tenant a standard interest rate on the deposit held.

Can You Charge a Pet Deposit?

Yes, the New Mexico security deposit laws and Landlord-Tenant laws do not cover pet deposits. But while there is a limit on how much you can charge as the deposit. No limit exists for pet deposits. So, a landlord in New Mexico has the right to ask for an additional pet deposit.

A landlord will generally ask for a pet deposit ranging between one and two months’ rent.

Please note that people with disabilities have special rental provisions in the law. According to the Fair Housing Act, disabled persons have a right to full and equal access to housing. It would therefore be discriminative to require them to pay a pet deposit for their service animals.

new mexico landlord tenant rights

How Can You Use the Security Deposit?

New Mexico rental laws allow landlords to make deductions to their tenant’s security deposit in certain circumstances such as:

Failure to Pay Rent

Nonpayment of rent is one of the top reasons for security deposit deductions in New Mexico. If your tenant stops paying rent for whatever reason, you can withhold part or all their deposit to cover your losses.

Clearing Unpaid Bills

In a typical lease agreement, utilities will be in the tenant’s name. So, it would be their responsibility to ensure they have cleared those bills, as necessary. But if they move out without clearing these bills, a landlord can use part or all their deposit to clear them.

Cover Lease Violations

Should a tenant fail to report maintenance issues on time, resulting in expensive fixes that could be avoided, the New Mexico laws allow landlords to use the deposit to cover their costs.

Repair Excessive Property Damage

When damage occurs because of abuse or negligence by a tenant such as broken windows, holes in the wall, and broken tiles. New Mexico security deposit rules allow landlords to cover their costs using the deposit.

But landlords cannot hold their New Mexico tenants liable for damage resulting from normal wear and tear.

Can You Perform Walk-Through inspections?

Walk-through inspections help document the rentals’ condition prior to a tenant moving out. A landlord can use a move-in inspection checklist as a reference to confirm whether any excessive damage has occurred.

If there is damage, the tenant will need to fix them prior to moving out. If they do not, the landlord may have a right to make appropriate deductions to the tenant’s deposit.

In a few states, walk-through inspections are mandatory. But not the case in New Mexico where they are optional.

When Do You Return the Deposit?

As per New Mexico security deposit policy, a landlord has 30 days to return their tenants’ security deposit upon lease termination.

If there are any deductions, landlords must include a written statement of which ones were made and the amount for each deduction.

What Can Happen if the Deposit is not returned to the Tenant?

If you wrongfully withhold your tenant’s security deposit, there may be the repercussions:

  • You may forfeit the entire security deposits amount.
  • You may forfeit the right to make any counterclaims regarding recovering the security deposit amount.
  • You may be liable for paying your tenant court costs and attorney fees they incurred a resulting lawsuit.

So, per New Mexico security deposit regulations, it’s in your best interest as a landlord to return security deposits to the tenants on time.

rental unit prepaid rent

What Happens if you Sell the Property?

If you choose to sell or transfer the ownership of the unit, New Mexico security deposit policies give you two options to consider:

  • You can transfer the deposits to the incoming owner. In such a case you will then need to notify your tenants of this information.
  • The other option would be to return the security deposits back to the tenants (less any allowable deductions). You will then need to notify the incoming owner of this information.

Bottom Line

Understanding the security deposit regulations should be critical to any landlord looking to operate in the state. New Mexico landlords need to understand both how and where they need to store their security deposits as well as how and when to return them or make deductions.

You should also familiarize yourself with New Mexico landlord-tenant law, rent increase rules, and lease and rental agreement policies. If you have any further questions, it’s always a promising idea to contact an experienced property management company such as the team at Blue Door Realty. Contact us today, we would love to be of service!

Disclaimer: This blog post is not a substitute for professional legal advice. Laws change and this article may not be up to date at the time you read it. For expert legal advice please contact a lisenced professional.