Payment of Interest on Residential Security Deposits

Landlords of rental units subject to the Los Angeles Rent Stabilization Ordinance (i.e., "rent control") must pay interest to tenants on all security deposits held for at least one year.

During the tenancy, the tenant is to be paid the accrued interest on a monthly or yearly basis either as a direct payment or as a credit against future rent. The landlord can choose the method of payment and must notify the tenant in writing of the choice.

Upon termination of the tenancy, the tenant is entitled to receive all unpaid, accumulated interest at the same time and in the same manner that their security deposit is returned.

The landlord can calculate the interest in one of two ways: (1) use the simple interest rates established by the Rent Adjustment Commission or (2) pay the tenant the actual amount earned on the deposit.

The simple interest rates established by the Commission are as follows: Five percent (5%) for the years 1990 through 2000; two percent (2%) for 2001; no interest payable for 2002; one percent (1%) for 2003; 0.26% for 2004; 1.21% for 2005; and 1.74% for 2006.

The only recourse the tenant has for a landlord's failure to pay the interest is filing a civil action, usually in the Small Claims Court.