Security Deposits in Connecticut: A Guide for Accidental and Out-of-State Landlords

If you’ve inherited a home, moved out of state, or decided to keep your house instead of selling, you may suddenly find yourself an “accidental landlord” in Connecticut. While renting out your property can generate steady income, it also comes with responsibilities that catch many new or out-of-state owners by surprise.

One of the biggest pitfalls? Security deposits.

Connecticut has strict rules about how deposits must be handled, and even a small mistake can lead to big financial penalties. Here’s what every new landlord should know.

What Connecticut Requires

• How much you can collect
  Up to two months’ rent, or one month’s rent if the tenant is 62 or older.

• Deposits must earn interest
  Every deposit earns annual interest, which must be paid or credited back to the tenant.

• Strict deadlines
  Deposits and interest must be returned within about three weeks of move-out (or a bit longer if you’re waiting on the tenant’s forwarding address).

• Penalties for mistakes
  Missing the rules can mean paying double the deposit plus interest, along with fines.

Why Accidental and Out-of-State Landlords Are at Risk

For owners who never planned to be landlords, these requirements can feel overwhelming. Common problems include:

• Missing the deadline — mailing a check at the last minute doesn’t guarantee compliance if the tenant receives it late.

• Forgetting annual interest payments — easy to overlook when managing from afar.

• Tenant disputes — without clear documentation, courts often side with tenants.

• Property sales or transfers — deposits must legally transfer to the new owner, and missed transfers can leave you liable.

A Costly Example

Picture this: You collect a $3,000 deposit and deduct $800 for damages at move-out. You mail the refund check on the final day allowed. The tenant receives it late.

In court, you could be ordered to pay double the deposit ($6,000) plus interest. Your $800 deduction turns into a multi-thousand-dollar loss — all because of a technicality.

How Professional Property Management Helps

A professional property manager takes these risks off your plate. With proper systems in place, your deposits are:

• Kept in secure escrow accounts

• Tracked for annual interest payments

• Returned on time with full documentation

• Properly transferred if the property is sold

For out-of-state and first-time landlords, this isn’t just about convenience — it’s about protecting your rental income and peace of mind.

The Bottom Line

If you’re an out-of-state property owner or a Connecticut homeowner turned landlord, security deposits are one of the most expensive mistakes you can make on your own.

By working with a professional property manager, you:

• Stay fully compliant with Connecticut law

• Avoid financial penalties and disputes

• Give tenants confidence their money is secure

👉 Don’t risk losing thousands on a technicality. If you’ve kept your Connecticut home as a rental, let us handle deposits, compliance, and tenant management so your property generates income safely.