Interest on Security Deposits
Chapter 49 of the San Francisco Administrative Code requires landlords to pay interest annually on deposits held over one year, regardless of what the deposit is called. Interest payments apply to all residential rental units in San Francisco, including those exempt from the Rent Ordinance, with one exception: where the rent for the unit is assisted or subsidized by a government agency, the interest payment requirement does not apply.
Interest must be paid every year on the tenant’s “annual due date.” For tenancies beginning after September 1, 1983, the annual due date is the same day and month the landlord received the deposit from the tenant. (If the tenant moved in and paid a deposit before September 1, 1983, interest was due on September 1, 1984 and every September 1st thereafter.)
If the tenant vacates before one full year of occupancy, no interest is due. Where a tenant vacates after one year of occupancy but before the next annual due date, the interest payment for the partial year period must be pro-rated and calculated using the interest rate in effect on the date the tenant vacates.
This Year's Security Deposit Interest Rate
The rate of interest owed on deposits for the period March 1, 2023 through February 29, 2024 is 2.3%. The rate of interest owed on deposits for the period March 1, 2022 through February 28, 2023 is 0.1%. The new rate is published annually by the Rent Board in early January for the one-year period beginning March 1st.
Pursuant to San Francisco Administrative Code, Chapter 49.2, the Rent Board calculates the interest rate according to the annual average of the 90-Day AA Financial Commercial Paper Interest Rate (rounded to the nearest tenth) for the immediately preceding calendar year as published by the Federal Reserve.
Here's a list of interest rates for security deposits since September 1983. This list is also available at our office.
How to calculate the amount of interest owed
Generally, the tenant is owed simple interest at the rate in effect when the security deposit interest payment is due. If the deposit held is $1,000.00 and the applicable interest rate is 1.7%, then the interest payment due is $17.00. Pursuant to Chapter 49, if interest is owed for multiple years, the interest may not be compounded. For example, if the deposit held is $2,000.00 and interest for two years is to be paid on the annual due date of November 1, 2018, the landlord would owe the tenant 0.6% or $12.00 for 2017, plus 1.2% or $24.00 for 2018, for a total of $36.00. Other than payment of the past interest owed, Chapter 49 does not provide for any penalties for the late payment of interest.
Please note: If the tenant’s annual due date fell in the period between August 4, 2002 and June 14, 2003, please contact the Rent Board for special rules that apply for calculating the amount of interest for that period only.
How to pay security deposit interest
The landlord has the option of paying the security deposit interest to the tenant in the form of either a direct payment or a credit against the tenant’s rent. For units that are covered by the Rent Ordinance and subject to the annual Rent Board fee, Section 37A.6 of the San Francisco Administrative Code allows the landlord to deduct 50% of the annual Rent Board fee from the security deposit interest payment due to the tenant each year.
Security Deposit interest must be paid within two weeks of the date the tenant vacates. However, subject to the limitations and requirements set forth in Section 1950.5(e) of the California Civil Code, a landlord may retain a portion of the unpaid accrued interest where the amount of the security deposit alone is insufficient to cover unpaid rent, repair of damages to the premises caused by the tenant, or necessary cleaning of the premises.
Generally, disputes concerning security deposits or security deposit interest issues are decided in Small Claims Court. The Rent Board does not have jurisdiction over these disputes and the Rent Board staff cannot give legal advice concerning these issues. Please consult an attorney or appropriate agency for specific advice.
General Information about Security Deposits
Tags: Topic 101; Topic 103