Interest Payments on Security Deposits

Posted on: February 18, 2019 by Castelblanco Law Group, APLC
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For those buildings and residential units that are protected by the Rent Stabilization Ordinance of Los Angeles (“RSO”), a landlord may be required to pay interest on a tenant’s security deposit. This article will explain to you when such interest payments are applicable to a rental unit. These requirements will help you understand whether you may be entitled to payments of interest.

  1. What is a Security Deposit? A security deposit is essentially any money paid by a tenant to a landlord, which is subsequently held by the landlord for the purposes of providing compensation for a tenant’s failure to pay rent, for repairing damages to the premises, exclusive of ordinary wear and tear.
  2. Must Your Landlord Pay Interest on Your Security Deposit? If your unit is subject to the RSO, and your landlord has held your security deposit for over one year, then yes.
  3. How Is The Amount Of Interest Determined? Since 2004, interest payable to tenants may be determined by using the simple interest rate established by the RSO or paying the tenant the actual amount earned on the security deposit. If the second method is used, the landlord must provide the tenant with a copy of a bank statement indicating the interest earned on their deposit for the year.
  4. How and When Is The Interest Payment To Be Made? During the tenancy, a tenant is to be given the unpaid accrued interest on security deposit in the form of either a direct payment or a credit against rent. Upon termination of the tenancy, payment of any unpaid accumulated interest on the tenant’s security deposit must be made at the same time and in the manner required for return of security deposits.
  5. What Action Can a Tenant Take to Recover the Amount Owed if He is Not Paid? The tenant may bring an action in a court of appropriate jurisdiction including, but not limited to, Small Claims Court, to recover the amount owed.

Since 1995, attorney Eric Castelblanco has been dedicated to helping tenants understand and assert their rights. For more information about your rights, call (213)388-6004 or visit his website at www.castelblanco.com.  The information presented in this column is for educational purposes only. You should seek the advice of an attorney regarding your individual situation.  

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