Security Deposits and Late Fees: What Oregon Law Allows

A common question I get when discussing Tenant Screening and the rental process with a new landlord in Salem or Keizer is: how much can I actually hold for a deposit, what can I keep when the tenant moves out, and can I charge a late fee or am I going to get myself in trouble. The short answer is that Oregon does not leave this to your gut. There is no dollar cap on a security deposit, but the amount has to be written into the lease, you get exactly 31 days after the tenant moves out to return it or send an itemized accounting, and late fees have to follow one of three specific formulas the state wrote into statute, starting no earlier than the 4th day rent is late. None of that is a matter of local custom or what you heard from another landlord at a barbecue. It is written down, with numbers attached, under ORS 90.300 and ORS 90.260.

That is actually the thing I want landlords to sit with before we go any further. Oregon treats deposits and late fees as a checklist with teeth, not a gray area where reasonable people can land in different places. I quote real numbers in this business, not what somebody assumes is normal, and the whole reason I lean on that rule is because guessing wrong here is not a judgment call, it is a compliance failure on one of the biggest assets most people own.

There Is No Deposit Cap, But the Lease Language Rule Is Not Optional

Oregon does not set a maximum security deposit amount the way some states do. You can charge what the market supports. But the amount only means something if it is written clearly into the rental agreement before move-in, along with a receipt you give the tenant within days of collecting it. If a landlord tells me they just verbally agreed on a deposit amount with a tenant and never spelled it out in writing, I tell them the same thing I would tell someone handing a contractor cash with no invoice: you have nothing to point to later if there is a dispute. The lease is the document that does the work for you. Treat it the way you would treat anything tied to your largest investment, which is to say, get it in writing and get it right the first time.

The 31 Day Clock and What You Can Actually Deduct

Once a tenant moves out and hands back possession, the clock starts. You have 31 days to either return the full deposit or send a written, itemized accounting of what you are keeping and why, under ORS 90.300. Miss that window, or send an accounting that does not hold up, and a tenant can pursue double damages. That is not a slap on the wrist, that is the state telling you that documentation is not optional.

What can you actually deduct? Unpaid rent, and damage beyond normal wear and tear. Normal wear and tear is not deductible, full stop, no matter how much a worn carpet bothers you. Carpet that is matted from years of foot traffic is wear and tear. Carpet with a cigarette burn or dog urine stains soaked into the pad is damage. The difference between those two categories is exactly where landlords get themselves in trouble, and the only real defense is documentation from day one, meaning move-in photos, a signed move-in condition report, and the same thing again at move-out so you are comparing apples to apples instead of arguing from memory. I would rather see a landlord spend twenty minutes taking photos on move-in day than spend an afternoon in small claims court trying to prove what the unit looked like a year ago.

Late Fees: Three Formulas, One Hard Floor

This is the part that trips up almost every small landlord I talk to, because they assume a late fee is whatever feels fair, like forty or fifty bucks because that is what a friend charges. Oregon does not work that way. The statute gives you exactly three allowed structures and you pick one, write it into the lease, and apply it consistently. You can charge a reasonable flat fee once per rental period, a per-day fee that cannot exceed 6 percent of that flat amount, or 5 percent of the rent for each five day period it remains unpaid. None of those three can start before the 4th day of the rental period, meaning you cannot charge a late fee on day one or day two just because rent did not show up on the first, under ORS 90.260.

Beyond late fees, ORS 90.302 limits you to a specific, enumerated list of other fees you are even allowed to charge, things like a dishonored check fee or a capped noncompliance fee, and it specifically bars charging a tenant for an expense you are only anticipating might happen at lease start. You cannot invent a new fee category because it feels fair to you. If it is not on the list, it is not a fee you can collect, and that is exactly the kind of detail that separates a landlord who wrote their own lease off a template five years ago from one who has someone checking it against current law.

What's New for 2026: Holding Deposits

As of January 1, 2026, Oregon added a new wrinkle around holding deposits, the money a landlord sometimes collects to hold a unit for an applicant before move-in. Under the updated rules, a landlord can only collect a holding deposit after an applicant has actually been approved, not before, which closes off the practice of collecting money from multiple hopeful applicants while you are still deciding who gets the unit (source). I bring this up because it is proof of something I tell every landlord I work with. Oregon's rental rules do not sit still. The same legislature that just moved the statewide maximum rent increase from 9.5 percent in 2026 to 10 percent for 2027, announced in late September of this year, is the same body that keeps tweaking deposit and fee rules almost every session. If you wrote your lease in 2019 and have not looked at it since, you are very likely out of date on more than one clause. You can read more about where that annual rent cap number comes from and why I do not always recommend landlords use the full amount in my piece on Oregon's broader rental property regulations.

None of This Matters If You Picked the Wrong Tenant

Here is the part I want every new landlord to actually hear, because it gets buried under all the statute numbers. A perfectly worded late fee clause and a flawless move-in photo file will not save you from a tenant who never intended to pay on time or take care of the unit in the first place. Tenant screening is the whole ballgame. With a tenant who pays on time and treats the place like their own, you will probably never even need to invoke the late fee formula or argue about a deposit deduction, because the dispute never happens. One bad tenant, on the other hand, can turn a simple deposit return into a drawn out mess no matter how airtight your lease language is. I have said this to clients more times than I can count: get the screening right and the deposit and late fee clauses become paperwork you rarely have to use for their intended purpose. If you want the process laid out step by step, I wrote a full guide on how to learn why tenant screening matters more than deposit clauses, and it is worth reading before you ever post a listing.

When a Deposit Dispute Needs an Attorney, Not a Guess

I am a broker, not an attorney, and I will tell any landlord the same thing I tell myself. If a deposit dispute escalates to the point where a tenant is disputing deductions in writing, threatening double damages, or you are unsure whether a specific charge fits inside the allowed fee categories, that is the moment to call a landlord-tenant attorney rather than guess your way through it. The statutes I have walked through here give you the structure, but applying them to your specific lease, your specific move-out report, and your specific tenant's claim is exactly the kind of thing a professional should weigh in on before you send a letter you cannot take back. The same logic applies if you end up needing to remove a tenant altogether. I covered the procedural side of that in my post on how to understand Oregon's eviction process and tenant rights, and the throughline in both posts is the same: these are rules with exact numbers and exact deadlines, not areas where you want to be the one improvising.

Questions people ask

Do you charge late fees to your tenants?

Yes, and I structure every late fee clause around one of the three formulas Oregon actually allows, a flat fee, a capped per-day fee, or 5 percent of rent per five day period, written into the lease before the tenant ever signs. I never start charging before the 4th day of the rental period, because that floor is not negotiable under state law, and I would rather have one clean, enforceable clause than try to improvise something that sounds reasonable but is not actually legal.

What type of screening goes into finding a tenant?

I apply the same written criteria to every applicant before I ever look at a single application, income verification, rental history, and background checks run consistently rather than judged case by case as people walk in the door. That consistency protects the landlord as much as it protects the applicant, and it is the single biggest factor in whether a tenancy ends up simple and rewarding or turns into a headache that makes you reconsider owning rental property at all.

Where do I get rental forms?

I point new landlords toward Oregon-specific lease templates rather than a generic form pulled off the internet, because Oregon's deposit, late fee, and notice requirements are specific enough that a form built for another state will get you into trouble fast. If you are working with me on a property, I can point you to current, compliant forms as part of that relationship, and either way I would always run anything you are unsure about past a landlord-tenant attorney before you use it.

If you are putting together your first lease or revisiting one you have not touched in a few years, the one thing I would do before anything else is sit down and write out your deposit amount, your late fee formula, and your screening criteria in plain language, then compare it line by line against the current statutes linked above. That single hour of homework is cheaper than a dispute, and it is exactly the kind of groundwork that keeps a rental property a source of monthly cash flow instead of a source of stress.

Jordan Sparks

Principal Broker, Sparks Property Group at SMI Real Estate. Specializing in Multifamily and Investment property in Salem, Keizer, and the Willamette Valley. Licensed in Oregon, #200610098.

jordan@smire.com · 541.646.0650

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