Landlords in Los Angeles renting units subject to LA’s Rent Stabilization Ordinance are required to pay interest on all security deposits held for at least one year. See L.A.M.C. § 151.06.02. Although state law does not require the payment of interest payments on security deposits, local rent ordinances do.
To determine the interest rate, landlords may simply refer to the Rent Adjustment Commission’s (RAC) established annual rate of interest which is published by LAHD. The interest rate set by the RAC for 2013 is 0.15%. During the tenancy, landlords may choose to pay out the interest either monthly or annually in the form of either a direct payment or a credit against rent. Landlords must notify the tenant in writing of their choice. Upon termination of the tenancy, payment must be made at the same time as required for the return of the security deposit pursuant to Cal. Civ. Code § 1950.5.
Keep in mind that only rental units subject to LA’s rent stabilization ordinance must pay interest on security deposits. Jurisdictions not subject to LA’s rent stabilization ordinance are not obligated to pay interest. See Korens v. R.W. Zukin Corp., (1989) 212 Cal.App.3d 1054 (There is no obligation implied by law for a landlord to pay interest on a tenant’s security deposit.)
If you have a question regarding your tenant’s security deposit, contact one of our Los Angeles Landlord/Tenant Attorneys for a free consultation and case evaluation.