Security Deposits in Virginia:
A Guide for Owners and Residents

Maximum Security Deposit

• Under § 55.1-1226(A), a landlord may not demand or receive a security deposit, however named, of more than two months' periodic rent.
• Virginia defines "security deposit" to include a pet deposit ( 55.1-1200), so pet deposits count toward the two-month cap.
• If a landlord requires damage insurance or renter's insurance premiums to be paid before move-in, the deposit plus those premiums together may not exceed two months' rent ( 55.1-1206).

Who the Rules Apply To

• The VRLTA applies to all single-family and multifamily dwelling units in Virginia, and localities cannot waive it ( 55.1-1201).

Holding the Deposit (Escrow)

• When a real estate licensee manages the property, security deposits must be held in a federally insured account labeled "escrow" and may not be commingled with the firm's own funds (18VAC135-20-181, effective April 1, 2026).
• Company policy: Peabody Residential holds tenant security deposits in our escrow account and handles deposit retention and disbursement for the owners we represent.

Interest

• The current text of § 55.1-1226 does not require landlords to pay interest on security deposits.

How Deposits May Be Paid

• Since July 1, 2026, landlords must accept security deposits by check and money order. Any payment-processing fee may not exceed the landlord's actual cost, and a fee-free option must be available (Williams Mullen summary of HB 1005 / SB 313).

Deposit Amount Disclosure

Company policy: The deposit amount is:

• Clearly disclosed in all online advertising.
• Clearly disclosed before an applicant applies.
• Stated in the lease agreement.

At Move-In

• Within 5 days after occupancy, the landlord gives the tenant a written report itemizing damage that exists at move-in ( 55.1-1214).
• The report is deemed correct unless the tenant objects in writing within 5 days of receiving it.
• The law also allows a written policy where the tenant prepares the report, or where landlord and tenant prepare and sign it jointly.
• This report becomes key evidence in any later deposit decision.

Company policy: Peabody Residential also documents the home's condition with photographs or video before you move in, for reference at move-out.

During the Tenancy

• The deposit remains held in escrow.
• If a deduction is taken during the tenancy, the landlord must notify the tenant in writing, with itemized reasons, within 30 days of determining the deduction. This notice isn't required for deductions made less than 30 days before the lease ends (§ 55.1-1226(E)).

Notice of Your Right to Attend the Move-Out Inspection

• Within 5 days after receiving a tenant's notice to vacate (or when the landlord asks the tenant to vacate), the landlord must tell the tenant in writing that they may be present at the move-out inspection (§ 55.1-1226(G)).
• A tenant who wants to attend must say so in writing. The landlord then notifies the tenant of the date and time.
• The move-out inspection must take place within 72 hours after the tenant delivers possession.

At Move-Out, Your Peabody Residential Property Manager

• Conducts the move-out inspection.
• Reviews the move-in report.
• Compares move-in and move-out condition.
• Collects invoices, estimates or receipts.
• Prepares a written Security Deposit Disposition with an itemized list of damages.

All Deductions Must Be

• Allowed by § 55.1-1226(A).
• Made in good faith.
• Supported by documentation.
• Itemized clearly.

Return Timeline

• The landlord must send the itemized written disposition and any refund within 45 days after the tenancy ends or the tenant vacates, whichever is later (§ 55.1-1226(A)).
• If damages exceed the deposit and need a third-party contractor, the landlord may notify the tenant of that within the 45 days and then has 15 more days to provide the itemized repair costs (§ 55.1-1226(E)).
• Where several tenants share a lease, the refund is one check payable to all of them, sent to the forwarding address one tenant provides, unless all tenants agree otherwise in writing (§ 55.1-1226(B)).
• Final utility bills: with proper advance written notice, a landlord may hold back a reasonable portion to cover a tenant's unpaid water, sewer or other utility bill owed to a third-party provider. The balance is refunded within 10 days after the bill is paid or after the tenant provides proof of payment (§ 55.1-1226(C)).

Company policy: Peabody Residential usually processes the disposition of security deposits within 30 days of the last day you occupied the home, well inside the 45 days Virginia allows. Because the deposit secures the whole lease, it is refunded as one disposition to all tenants on the lease; reimbursing a departing roommate is handled among the tenants.

Virginia lets a landlord deduct for damage caused by a tenant's failure to meet their duties under § 55.1-1227, less reasonable wear and tear. The VRLTA does not define "reasonable wear and tear," so it is judged case by case: normal deterioration from ordinary living is not chargeable; damage from negligence, carelessness, accident or abuse is.

Examples Usually Considered Normal Wear

• Minor scuff marks on walls
• Faded or slightly worn paint
• Carpet wear in normal traffic areas
• Loosened hardware from normal use

Examples Usually Not Considered Normal Wear

• Large holes in walls or doors
• Pet urine stains or odors
• Broken fixtures, blinds or appliances
• Excessive dirt, grease or trash left behind
• Unauthorized alterations

Under § 55.1-1226(A), a deposit may be applied only to:

1. Accrued rent, including reasonable late charges stated in the lease.
2. Damages caused by the tenant's failure to meet their duties under § 55.1-1227, less reasonable wear and tear.
3. Other damages or charges provided for in the rental agreement.
4. Actual damages for breach of the lease under § 55.1-1251, such as when a tenant leaves early or without proper notice.

In practice, lawful deductions may include unpaid rent, damage beyond reasonable wear and tear, cleaning needed to restore the unit's move-in condition, unauthorized alterations, and missing fixtures or property.

Under Virginia law and Peabody Residential policy, tenants are not charged for:

• Reasonable wear and tear
• Damage or conditions that existed at move-in and are listed on the move-in report
• Upgrades, improvements or betterment beyond the original condition
• General maintenance or repair fees, unless the repair was caused by the tenant's own violation (restricted by statute since July 1, 2026)
• Company policy: Routine rekeying between tenants
• Any charge we cannot support with documentation

There are no automatic charges against a tenant's deposit. Every deduction is specific and supported.

Carpet and Paint

Unlike some states, Virginia has no statute that sets rules specifically for carpet or paint. The general rule applies: a tenant may be charged only for actual damage beyond reasonable wear and tear.

Company policy: When carpet or paint must be replaced because of tenant damage, we charge only for the damaged area and account for the age of the item, so tenants don't pay for a brand-new replacement of something that was already worn.

Penalties for Noncompliance

If a landlord willfully fails to comply with § 55.1-1226, the court must order:

• Return of the security deposit to the tenant
• The tenant's actual damages
• Reasonable attorney fees

If the tenant owes rent, the court instead credits an amount equal to the deposit against the rent owed (§ 55.1-1226(E)).

Other rules that protect tenants:

• Records: Landlords must keep itemized records of deposit deductions for the past two years and let a tenant, or their agent or attorney, inspect their own records during normal business hours (§ 55.1-1226(F)).
• Sale of the property: The seller must transfer deposits to the buyer at closing ( 55.1-1213). Whoever owns the property when the tenancy ends must return any deposit owed, even if the prior owner never transferred it (§ 55.1-1226(E)).
• Damage found later: A landlord who discovers more damage after the disposition may still pursue it, but the tenant can use the move-out report as evidence the damage wasn't there at move-out (§ 55.1-1226(G)).

These rules don't prevent either the landlord or the tenant from recovering other damages allowed under the VRLTA.

Security deposit deductions are supported by:

• The move-in inspection report
• The move-out inspection report
• Date-stamped photos
• Invoices or receipts
• Vendor estimates

Peabody Residential receives ongoing education on industry standards and Virginia law, including compliance and documentation.

We recognize that deposit decisions can sometimes feel subjective. If a tenant disputes a deduction:

• Submit the dispute in writing to info@PeabodyResidential.com, listing each charge you disagree with and why.
• Company policy: Your property manager reviews it first. If it isn't resolved, it is escalated to the Director.
• Company policy: We send a formal written response.
• By law, tenants may also inspect their deduction records during normal business hours (§ 55.1-1226(F)).

This structured review keeps the process fair, compliant and professional.

Our goal is to return the full security deposit whenever the law allows. Because deposit handling is one of the most common sources of landlord-tenant disputes, we:

• Follow the current statute precisely
• Avoid flat or standardized charges
• Rely on documentation
• Train our team as Virginia law changes
• Escalate disputes to senior review

Virginia has updated its landlord-tenant laws in recent sessions, including 2026 changes to how deposits and rent may be paid. Our systems reflect these changes and are designed to protect both residents and owners from avoidable disputes.

We believe that when property management is done with integrity and transparency, tenants and owners both benefit.