Interest on Security Deposits in Los Angeles and Eviction Cases

Before you file an eviction in Los Angeles, there’s a detail many landlords overlook—and it can cost you your entire case. If your property falls under the Rent Stabilization Ordinance (RSO), you’re required to pay annual interest on tenant security deposits. Miss it, and tenants can use that failure as a defense in court. Judges are starting to take this seriously. Before you take legal action, make sure you’re fully compliant.

Need help reviewing your process? Contact our landlord-tenant attorneys today before filing your eviction.

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Landlords in Los Angeles, before you file an eviction, you need to ask one critical question: Are you current on security deposit interest payments? Because it could mean the difference between winning and losing your eviction case.

If your property is subject to the city of Los Angeles RSO, you’re required to pay interest on security deposits each year.

Landlords to Pay Interest on Security Deposits

Here’s what the law requires. Under LAMC Section 151.06, landlords must calculate annual interest on each tenant’s security deposit using the rate published by the Housing Department. Landlords must pay that interest either by a direct payment or as a rent credit to the tenant.

And finally, landlords must notify the tenant in writing of which method you ultimately choose. If you don’t notify the tenant, the payment obligation is incomplete, and your default can create legal exposure.

Security Deposit Interest and Eviction Cases

Here’s the part that’s really important for eviction cases.

Defense for Unlawful Detainer Actions

Tenant attorneys are increasingly raising nonpayment of security deposit interest as a defense to unlawful detainer actions. More importantly, judges in some courts are accepting this defense and forcing landlords to dismiss eviction cases where interest hasn’t been paid or documented.

That means even if you have valid grounds to evict, your case can be derailed if you haven’t made timely interest payments or otherwise provided written notifications.

Steps to Take Before Filing and Unlawful Detainer Action

Here’s what you need to do before filing an unlawful detainer action. First, confirm whether your property is subject to the RSO. Second, check the current and historical interest rates published by the Housing Department. Third, issue written notice and make the annual interest payment to the tenant. Fourth, keep records and notifications of payments to the tenant.

Noncompliance with RSO interest obligations isn’t a minor bookkeeping issue. It’s now a real defense that tenants used to push back against eviction cases, and judges are listening.

Contact Our Attorneys About Security Deposit Interest Procedures

If you’re a landlord in Los Angeles or a property management company handling RSO units, review your security deposit interest procedures now. Talk to our landlord-tenant attorney at SNS Law Group before you file any eviction because missing this step could mean a dismissed case and lost money and time.