Iowa Security Deposit Law: 2-Month Cap, 30-Day Return

Iowa Code 562A.12 governs rental deposits. Subsection 1 states a landlord "shall not demand or receive as a security deposit an amount or value in excess of two months' rent." Within 30 days from termination of the tenancy and receipt of the tenant's mailing address or delivery instructions, the landlord must return the deposit or furnish a written statement showing the specific reason for withholding (562A.12(3)). Deductions are limited to unpaid rent or other funds due, restoring the unit to its original condition (ordinary wear and tear excepted), and recovering possession from a non-good-faith holdover tenant. A landlord who fails to give the written statement within 30 days "shall forfeit all rights to withhold any portion of the rental deposit" (562A.12(4)). The landlord bears the burden of proving the reason for any withholding.

Under Iowa Code 562A.12(7), bad-faith retention of a deposit subjects the landlord to punitive damages not to exceed twice the monthly rental payment, in addition to actual damages. Section 562A.12(8) lets the court award reasonable attorney fees to the prevailing party in any action on the rental agreement.