Subd. 1. Definition.

For the purpose of this section, "prelease deposit" means payment given to a landlord from a prospective tenant of a residential dwelling unit before the prospective tenant and the landlord have entered into a rental agreement. "Prelease deposit" does not include the payment of a reasonable applicant screening fee used to conduct a background check on the prospective tenant.

Subd. 2. Limitations.

1. (a) A prelease deposit may be accepted only if the landlord and prospective tenant enter into a conspicuous written agreement that includes:

   1. (1) the circumstances under which it will be returned; and
   2. (2) that the landlord is required to return the prelease deposit within seven days of the occurrence of a circumstance described in clause (1).
2. (b) "Return" means postmarked within seven days except that upon the prospective tenant's request, a landlord may destroy the payment or hold it for retrieval by the tenant instead of returning it by mail.

Subd. 3. Application on entry into rental agreement.

If a prospective tenant and landlord do enter into a rental agreement, the prelease deposit must be applied to that tenant's security deposit or rent.

Subd. 4. Remedies.

In addition to any other remedies, a landlord who violates this section is liable to the payor of the prelease deposit for the amount of the deposit paid, plus one-half of that amount as a penalty. A landlord who enters into a rental agreement with a tenant is not liable under this section unless the landlord failed to comply with subdivision 3.