The three rules in R.C. 5321.16
Ohio’s security deposit law is short, and it has three working parts.
| Rule | What it says | Division |
|---|---|---|
| Interest | The part of a deposit above the greater of $50 or one month’s rent earns 5% a year if the tenant stays six months or more, paid yearly | (A) |
| Return | Within 30 days after the rental agreement ends and possession is delivered, return the deposit or give an itemized written list of deductions | (B) |
| Penalty | A landlord who fails to comply owes the amount wrongfully withheld, an equal amount in damages, and reasonable attorney’s fees | (C) |
Two details matter for sellers. Deductions are limited to unpaid rent and damage caused by the tenant’s failure to meet their duties under R.C. 5321.05 or the lease. And the tenant must give a forwarding address in writing. A tenant who doesn’t loses the right to the extra damages and attorney’s fees, though not the deposit itself.
What the statute leaves out
R.C. 5321.16 says nothing about what happens to the deposit when the landlord sells mid-tenancy. It speaks only of “the landlord” and the end of the rental agreement. That gap is why the buyer and seller should settle it themselves in writing, rather than leave a tenant to chase two owners.
Without a written arrangement, a tenant who doesn’t get the deposit back may name the old landlord, the new landlord, or both. Neither owner wants to defend a claim that a closing statement could have prevented.
Crediting the deposit at closing
The cleanest method is a credit on the settlement statement. The steps:
- List each deposit in the purchase agreement, by unit, with the amount and the date it was collected.
- Add accrued interest for tenants who have been in place six months or more and whose deposit exceeds the R.C. 5321.16 threshold.
- Credit the total to the buyer at closing, so the seller’s proceeds drop by that amount and the buyer receives it.
- Send a joint letter to the tenant naming the new owner and confirming the buyer now holds the deposit.
- Hand over the records: the lease, the move-in condition report, photos, and the deposit receipt.
With the credit in place, the buyer becomes responsible for the 30-day return when the tenant eventually leaves.
Worked example: a duplex with two deposits
Suppose a seller has a duplex with two tenants:
- Unit A: rent $900, deposit $900, tenant in place two years. The deposit doesn’t exceed one month’s rent, so no interest is owed.
- Unit B: rent $800, deposit $1,200, tenant in place one year. The deposit exceeds one month’s rent by $400. At 5%, that is $20 of interest for the year, if it hasn’t already been paid.
The closing credit to the buyer would be $900 + $1,200 + $20 = $2,120. The numbers are illustrative; check your own leases and records, and have your title company or attorney confirm the credit.
If the tenant moves out at the sale
Sometimes the tenant leaves before closing, because the buyer wants the house empty or the lease simply ended. Then the seller is still the landlord when the tenancy ends, and the 30-day clock runs against the seller.
What to do:
- Walk the unit with the tenant on move-out day and take dated photos.
- Get the forwarding address in writing.
- Send the deposit, or an itemized list and the balance, within 30 days.
- Keep a copy of what you sent and proof of mailing.
Akron Municipal Court hears deposit and damage disputes at what it calls the second cause hearing. The court reminds landlords to bring evidence of the move-in condition and notes that tenants are not responsible for ordinary wear and tear.
Pet deposits, last month’s rent and manager-held funds
Not every dollar a tenant paid up front is the same, and the closing credit should treat each one correctly.
- Pet deposits are refundable money held against damage, so most landlords treat them like the main deposit and credit them to the buyer. A non-refundable pet fee is different and normally isn’t credited.
- Prepaid last month’s rent is rent, not a deposit. Credit it to the buyer as prepaid rent for the month it covers, so the buyer isn’t left with a free month owed to the tenant.
- Deposits held by a property manager must be pulled from the manager’s account before closing, or the manager must sign a transfer letter to the buyer’s manager.
- Missing records: if you can’t find a receipt, ask the tenant to confirm the amount in writing before closing, rather than guessing.
Get each figure confirmed in the purchase agreement, not on closing day.
Deposits in a cash for keys or early move-out deal
If you pay a tenant to leave early so you can sell, the deposit still needs an answer. Return it, apply it to rent the tenant agrees they owe, or have the tenant release it in exchange for a larger payment. Write the choice into the signed agreement. Our guide to cash for keys in Ohio covers the rest of that agreement.
Don’t hold back a deposit to pressure a tenant into moving. R.C. 5321.15 bars a landlord from using threats, lockouts or utility shutoffs to recover possession, and a deposit used as a lever invites a claim under both statutes.
Related rules for landlords who are selling
A deposit is one of several tenant issues in a sale. See tenant rights when a house is sold in Ohio for lease and notice rules, and the seller’s options on selling a rental property in Ohio. Ask an attorney to review the deposit language in your purchase agreement before you sign.
If you are deciding whether to sell with the tenants in place, our walkthrough process covers occupied houses too.
