Connecticut Security Deposit Laws: What Property Managers Should Know in 2024

Connecticut Security Deposit Laws: What Property Managers Should Know in 2024

Author: Kasee Godwin
Date: 10.27.2023

As a property manager in Connecticut, staying well-informed about the latest security deposit laws isn’t just good practice—it’s a cornerstone of your business’s credibility and legal compliance.

In this guide, we’ll break down Connecticut’s security deposit laws, including how much you can charge, what you can deduct, and the timeline for returning deposits. We’ll also cover what you need to know about security deposit alternatives—and if they’re required for Connecticut properties.

Connecticut Security Deposit Laws: Key Points

There are a few key points that property managers should know regarding legal compliance and the security deposits they receive from residents:

  • Connecticut landlord-tenant laws allow property managers to charge a maximum of two months’ rent for a security deposit. However, for residents 62 years of age or older, the maximum is reduced to one month’s rent.
  • Landlords may request additional deposits for pets—as long as they’re not service animals.
  • Connecticut property managers must store the security deposit in an escrow account in a Connecticut financial institution or bank.
  • The Connecticut Department of Banking requires property managers to annually pay their tenants interest on their security deposit. It must be paid either directly to the residents or as a credit toward the next month’s rent.
  • Property managers are generally required to return a resident’s security deposit (with interest) within 21 days.

Read on to take a closer look at Connecticut’s security deposit laws.

New Connecticut Security Deposit Laws in 2024

New regulations were signed into law in 2023 by Connecticut Governor Ned Lamont with the intent of increasing renters’ rights and improving accessibility to housing. Some notable changes include:

Application Fees

Property managers are allowed to charge for security deposits or the first month’s rent upfront, but they may no longer charge a rental application fee. They are also not allowed to charge move-in fees or move-out fees. 

The law also caps certain fees, such as a limit of $50 being charged by property managers for a tenant screening report—and potential renters must be given a copy of the report.

Overdue Rent Fees

Property managers can only charge one late fee for overdue rent, no matter how long it has been overdue. This late charge is capped at $5 per day, or 5% of overdue rent, and cannot exceed $50. Additionally, property managers must provide residents with a nine-day grace period before they’re able to charge a late fee. (For week-to-week renters, it is a four-day grace period.)

Sealed Eviction Records

By enacting Senate Bill 998, beginning in July 2024, eviction records will not be publicly accessible if:

  • A property manager withdraws their eviction filing
  • The case is dismissed
  • The renter wins the case

Timely Return of Security Deposits

As of October 1, 2023, Connecticut property managers must return residents’ security deposits within 21 days instead of 30 days. If a property manager fails to return a security deposit or provide an itemized list of deductions within 21 days, they are liable to pay the resident twice the original security deposit amount.

Security Deposit Alternative Laws in Connecticut

As of 2024, Connecticut does not have a law requiring property managers to offer residents security deposit alternatives (SDAs). However, a growing number of states have passed legislation related to SDAs, so property managers need to understand what a security deposit alternative is, and what the benefits to residents are. 

A security deposit alternative is an alternative to the traditional cash deposit required by property managers. Rather than asking residents to pay a sizeable upfront sum, alternatives such as surety bonds or installment-based deposit programs allow residents to pay smaller, recurring payments.

For example, Qira is a financial management platform for property managers that offers a security deposit program. This program allows residents to pay a monthly fee as low as $5 instead of a lump-sum cash deposit, reducing move-in costs. Qira also makes the security deposit collection process easier for property managers.

Platforms like Qira offer major benefits to both residents and property managers. Residents get to keep more cash in their pockets, and property managers don’t have to assume any additional risk—Qira handles it for them.

To learn more, check out Qira’s security deposit program here.

Collecting Security Deposits in Connecticut

Grasping the intricacies of security deposit collection is not just helpful—it’s crucial. Maneuvering the legal aspects of property management can be tricky, but with a clear strategy, you can secure your properties effectively and comply with state laws.

Maximum Security Deposits

Property managers may not charge a security deposit that is more than two months of rent payments. Property managers may not charge residents age 62 or older more than one month’s rent.

If a resident turns 62 years of age during the term of the lease agreement, the property manager is then required to return a portion of the security deposit so it is not more than one month’s rent.

Pet Deposit Laws

Property managers may charge an additional pet deposit fee unless the resident’s pet qualifies as a service animal or emotional support animal.

Storing Security Deposits 

Property managers in Connecticut are required to store their residents’ security deposits in an escrow account in a Connecticut financial institution or bank. It must be stored separately from the property manager’s personal savings deposits. 

Upon receiving the security deposit, the property manager has 30 days to inform the resident in writing of the name and address of the financial institution where the security deposit is being held, as well as the interest rate on the escrow account.

If a resident pays a security deposit in cash, property managers must provide the resident with a receipt that states the date, amount received, and the purpose of the payment.

Paying Interest on Security Deposits

Property owners in Connecticut must pay their residents interest on their security deposit every year. The payment must be made on the anniversary of the resident’s lease term, and it can be paid either directly to the residents or as a credit toward the next month’s rent.

In 2024, the minimum interest rate for security deposits is 0.55%. This rate is determined annually by the Banking Commissioner and may change from year to year. It is equal to the average commercial bank’s savings deposit rate.

Penalties for Failing to Pay Interest

If a landlord fails to pay their resident interest, they may be fined up to $100 for each offense. However, property managers do not need to pay residents interest for any month when the resident was 10 or more days late paying rent and was not charged a late fee.

Tax Implications of Security Deposits

In the state of Connecticut, a security deposit is not considered taxable income when it is first received—because it is not immediately considered revenue. This is because the property manager could still need to reimburse the security deposit to the resident. 

The security deposit becomes taxable once the property management company is no longer obligated to return it.

According to the Internal Revenue Service (IRS), property managers should follow three rules when determining when a security deposit should be reported as taxable income:

  1. If unpaid rent or some sort of violation leads to the property manager fully deducting from a security deposit, the amount kept should be reported as income in that same year.
  2. If the security deposit was used to cover chargeable expenses, the property manager does not need to report it as income.
  3. If both the property manager and resident agree that the security deposit may be used to cover the final month’s rent, the property manager must declare it as income as soon as the security deposit is received.  

Allowable Deposit Deductibles in Connecticut

Property managers in Connecticut may use a portion of the deposit (or all of it) if the property suffered damage that was the direct result of abuse or negligence by the resident.

Some reasons why property managers may deduct from a tenant’s security deposit include:

  • Nonpayment of rent or charges related to necessary repairs
  • Unpaid utility bills
  • Abandonment of the premises (i.e. the residents moves out of the property before the rental agreement is complete)
  • Damages to the property beyond normal wear and tear 

However, it’s important to note that certain conditions must be met for a property manager to use a resident’s security deposit to cover damages:

  • Damages must exceed normal wear and tear
  • The resident must have failed to comply with their obligations

Obligations of Residents

Property managers may only deduct from a resident’s security deposit to cover damage-related costs (that exceed normal wear and tear) if the resident has failed to comply with certain obligations. 

Connecticut landlord-tenant law says that residents are obligated to:

  • Ensure that all facilities and appliances within the property are reasonably used
  • Keep the property and all its fixtures clean and safe
  • Dispose of garbage regularly in a clean and safe manner
  • Follow all health and safety rules that may pertain to housing, building, or fire codes

What is Considered Normal Wear and Tear?

Normal wear and tear is the expected damage or natural deterioration of a rental property that occurs due to everyday use over time. For example:

  • Loose door handles
  • Fading paint
  • Faded hardwood floors
  • Small carpet stains
  • Minor scrapes on flooring or walls.

Excessive Property Damage

Any damage that is considered above and beyond normal wear and tear is commonly referred to as excessive property damage. For example: 

  • Broken windows and light fixtures
  • Large nail holes in the wall
  • Carpet stains or holes
  • Broken locks, door frames, or doors
  • Unauthorized painting or remodeling

Returning Security Deposits in Connecticut

Property managers should be aware of security deposit laws and communicate with their residents to make sure the process of returning security deposits goes smoothly for everyone.

Security Deposit Return Timeline

Once provided a forwarding address by their departing resident, Connecticut property managers have two timelines to consider for returning a security deposit, depending on which route the resident takes:

  1. Once a resident has moved out of the property and returned their keys, the property manager must return the security deposit (or the amount of the security deposit that remains after valid deductions) within 30 days.
  2. Once the resident provides written notice of their forwarding address, the property manager has 15 days to return the security deposit.

Property managers are expected to stick to whichever period comes later.

Important note: when returning the security deposit, property managers must remember to pay departing residents the accrued interest, as required by Connecticut security deposit law.

Penalties for Not Returning Security Deposits on Time

According to Connecticut law, a property manager who fails to return a resident’s security deposit on time, or fails to provide a written notice of itemized deductions, may be liable to pay twice the amount that was paid by the resident.

The Bottom Line on Connecticut’s Security Deposit Laws

Connecticut property managers must maintain a strong understanding of the state’s security deposit laws. By following these guidelines, property managers can better protect their investments and ensure a fair process for everyone involved.

If you’re a property manager looking to reduce resident move-in costs and simplify the security deposit collection process, Qira can help. Qira’s security deposit program is the only cash-managed system in the industry.

If you’re ready to get started, you can book a demo and learn more about Qira today.


Qira aims to keep this information as up-to-date as possible. The content provided here is for informational purposes only and should not replace legal advice. Please refer to the relevant government sources to check for any changes or updates to the law.


Kasee Godwin

Position: Director of Marketing
Social Networks

Kasee is the Director of Marketing for Qira. She has nearly 15 years of experience in the real estate marketing industry, including 10 years on the client side. In her spare time, she enjoys reading science fiction, exploring new wineries, and fostering Golden Retrievers.

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