Legislative Update

Two recent decisions affect property owners. The first is on the calculation of interest on security deposits.

 Interest on Security Deposits. Recent legislation on residential leases and the interest on security deposits has been passed, affecting landlords. HB 249 passed the legislature and becomes effective on January 1, 2015. This bill alters the calculation of interest that a rental housing owner is required to pay on a residential security deposit. The bill requires landlords to return security deposits with an interest rate of 1.5%, or a rate of interest equal to the US Treasury Daily Yield curve rate – whichever is higher. Current law requires the payment of 3% interest on security deposits.

Interest on security deposits is intended to reflect the time value of money. In times of high interest rates the tenant is shortchanged. During times of low interest the landlord overpays and must raise rents on existing tenants to make up the shortfall.

Landlords must hold security deposits in an interest bearing account, a certificate of deposit, or in securities issued by the federal government or the state. The deposit must be maintained in branches of federally-insured financial institutions doing business in the state. The deposits are held as escrow accounts – the money is not available for use by the owner. The monies held must be equal to all securities deposits for which the rental housing owner is liable. Eagle Management takes care of the security deposits for its landlords.

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