Do L.A. Landlords Have to Pay Interest on Security Deposits?

If you’re a landlord in Los Angeles, you may be legally required to pay interest on your tenant’s security deposit—and not knowing the rules could cost you.

Hi, I’m Bijan Shakibkoo, co-founder and managing partner at SNS Law Group, and in this video, I’ll break down when and how landlords must pay security deposit interest under the Rent Stabilization Ordinance (RSO).

If your property falls under the RSO—generally buildings built before October 1, 1978—and your tenant has lived there for more than 30 days, you’re likely required to pay annual interest, either using the set interest rate or the actual earnings from an interest-bearing account.

We’ll also explain when to pay the interest and how failing to comply can affect eviction cases and lead to legal penalties.

If you’re an LA landlord needing guidance on security deposit interest or other tenant-related matters, SNS Law Group is here to help. We specialize in landlord-tenant law and are dedicated to keeping you compliant.

Transcript:

Are you a landlord in L.A.? You might owe your tenant money and not even know it. Quick hint—it has to do with security deposits.

Hi, my name is Bijan Shakibkoo. I’m a co-founder and managing partner here at SNS Law Group. And make sure to follow us for more updates on LA’s ever-changing landlord-tenant laws.

Does a Landlord Have to Pay Interest on a Security Deposit?

Now, here’s something important for landlords in Los Angeles to know. If your property is subject to the Rent Stabilization Ordinance, or known as the RSO, you might be required to pay interest on your tenant’s security deposit, but only under certain conditions.

When Is Interest Required?

When is the interest required? Landlords must pay interest on security deposits if the rental property is covered by the RSO. This applies to rental units that are occupied by the same tenant for more than 30 days and are in a building constructed before October 1st of 1978.

How Do You Calculate the Interest?

How do you calculate the interest? You have two options. Your first option is to use a simple interest rate set annually by the Rent Adjustment Commission or pay the tenant the actual interest earned if the deposit is held in an interest-bearing account. If it’s not in such an account, the simple interest rate applies.

When Do You Pay the Interest?

When do you pay interest? Interest must be paid during the tenancy, either as a direct payment or as a credit against rent. And if the tenant moves out, you must pay any unpaid interest when returning the security deposit.

Contact SNS Law Group If You’re a Landlord in Los Angeles

As a landlord, it’s crucial to follow the law when it comes to security deposits. Ignoring these rules can open the door to legal trouble, such as defenses on eviction actions. So if you’re unsure about your responsibilities, let’s talk. We’re here to help you stay compliant, protect your property, and avoid costly mistakes. Reach out to us today for legal advice on security deposits and all landlord-tenant matters in Los Angeles.