North Dakota Security Deposit Interest

Does North Dakota require interest on security deposits?

Yes. North Dakota requires landlords to pay interest on security deposits held for more than nine months under NDCC § 47-16-07.1. The interest rate is not fixed by statute. Instead, North Dakota ties the rate to the Federal Reserve discount rate, which fluctuates. The deposit must be held in a federally insured interest-bearing account for the entire period.

How North Dakota deposit interest is calculated

Interest accrues at the Federal Reserve discount rate on deposits held longer than nine months. The rate is variable, so the actual interest owed depends on the prevailing rate during the holding period. Interest does not begin accruing until the deposit has been held for nine full months. For deposits held less than nine months, no interest is owed.

North Dakota's federally insured account requirement

Unlike many states that allow commingling, North Dakota requires the deposit to be held in a federally insured interest-bearing account. The landlord must disclose the name and address of the financial institution where the deposit is held. This is not optional: failure to use a qualifying account is a violation of NDCC § 47-16-07.1.

What happens if a North Dakota landlord doesn't pay required interest

A landlord who acts in bad faith by wrongfully retaining a deposit (including accrued interest) may be liable for treble damages under NDCC § 47-16-07.1. That means the tenant can recover up to three times the amount wrongfully withheld, plus reasonable attorney fees. The treble-damage provision makes North Dakota one of the more punitive states for deposit violations.

Worked example: calculating deposit interest in North Dakota

You hold a $2,000 security deposit for a tenant who has lived in your North Dakota rental for 2 years (24 months). Since the deposit has been held longer than 9 months, interest is required at the Federal Reserve discount rate.

Assuming the Fed discount rate averaged approximately 5.0% during the holding period, the calculation would be: $2,000 x 5.0% x 2 years = $200.00 (approximate). The actual amount depends on the rate in effect during each period the deposit was held.

Because the rate is variable, you should check the current Federal Reserve discount rate and compute interest based on the actual rate(s) in effect during the tenancy. If the rate changed mid-tenancy, pro-rate each period at the applicable rate.

North Dakota requires the deposit to be in a federally insured interest-bearing account. The actual interest the account earns may differ from the statutory minimum owed.

What experienced landlords do differently

• Open a dedicated interest-bearing account before collecting your first deposit. Commingling deposits with operating funds is a common violation that can void your right to any deductions.
• Send an annual interest statement even if the amount is small ($5-15/year on a typical deposit). The cost of a stamp is trivial compared to the penalty for noncompliance.
• Track each deposit in its own line item. If you manage multiple units, a simple spreadsheet with deposit date, amount, account number, and interest paid keeps you audit-ready.

Related North Dakota compliance tools

Landlords in North Dakota deal with more than just deposit interest. These free calculators cover the other compliance deadlines you need to track:

• North Dakota Eviction Timeline Estimator — Estimate the full eviction process from notice to possession
• North Dakota Maximum Late Fee Calculator — Calculate the highest late fee your lease can enforce
• North Dakota Rent Increase Notice Calculator — Find the required notice period for your planned increase
• North Dakota Security Deposit Return Deadline — Know exactly when the deposit must be returned or itemized

See all property management tools for investment, financing, and operations calculators.

Frequently asked questions about North Dakota deposit interest

What if I forgot to put the deposit in a separate account?

Fix it immediately: open a compliant account and deposit the funds. Going forward, document the correction. In some states, failure to use a proper account voids your right to claim deductions from the deposit. The sooner you correct, the better your legal position if the issue comes up.

What is the North Dakota deposit interest rate?

North Dakota ties the deposit interest rate to the Federal Reserve discount rate, which is variable. There is no fixed statutory rate. The landlord must pay at least the Fed discount rate on deposits held longer than nine months.

When does North Dakota deposit interest start accruing?

Interest begins accruing after the deposit has been held for nine full months. Deposits returned before the nine-month mark do not require interest.

Does North Dakota require a separate account for deposits?

Yes. NDCC § 47-16-07.1 requires the deposit to be held in a federally insured interest-bearing account. The landlord must disclose the name and address of the financial institution.

What are the penalties for not paying deposit interest in North Dakota?

A landlord who acts in bad faith by wrongfully retaining a deposit or accrued interest may be liable for treble damages (three times the amount withheld) plus reasonable attorney fees under NDCC § 47-16-07.1.