Hi everybody! It's Andy and welcome again to my office in Los Altos, California. I'm
an attorney licensed to practice law in California as well as New York. In this
video I'm going to go over California residential landlord-tenant situations,
specifically security deposits. And the question I'm actually going to go over
actually is whether or not a landlord has to pay interest on a security
deposit that they hold for a tenant. And, you know, that question, I guess, you can
phrase it from the tenant side as well basically is, you know, if I get my
security deposit back from my landlord, assuming that I, you know, have no
deductions and stuff, is my landlord supposed to pay me interest on top of
the deposit like a bank would. So before I actually go into the answer to that
question, I have to give you a couple disclaimers and if you have seen any of
my other landlord-tenant videos, you know I give the same disclaimer. It's probably
going to sound very familiar to you. So the first one is that this video is
going to be about residential landlord tenant law situations only. If you are in
a commercial situation meaning you've rented a warehouse, an office building, a
restaurant, grocery store, whatever, you can watch this video if you want. A lot
of the terms that I go over probably will sound very familiar to you. However
California does have a lot of differences between residential and
commercial landlord tenant law. There are a lot of similarities, but they're also
some very big differences. So this video, strictly speaking, does not
cover commercial stuff. Number two is that if you have sort of an unusual
rental situation, meaning that you've rented a house boat, mobile home,
something other than a brick-and-mortar like apartment building or single-family
home or something, this video probably is not going to apply to you either.
California has a lot of rules about mobile homes, houseboats, things like that
so this video strictly speaking does not cover that. Those situations, I think, are
more rare than, you know, the apartment or the house or the room, etc. So I'm
not going to go over the kind of rarer situations. Number three is that if
you have any sort of Section 8 situation or, you know, government funding
for your, for your housing, um, there's probably going to be a lot of rules
about what that particular program or programs require so
this video does not go over all those rules. Those rules often times are very
complicated and, I mean, it would be impossible for me to go over all of them
in this video. And the last requirement, basically, is that regardless of what the
state requires, it is possible that, you know, if you live in a county or city
that has local rules, those local rules will be in addition to what the state
requires. So if you do live in one of the cities or counties you have to follow
both sets. So you have to follow what the state requires and then you have to
follow what your city or county requires. So it's more than say if you lived in
another city or county that doesn't have those rules. So hopefully all of that
made sense. There's a lot of disclaimers. California landlord-tenant law is very
fact-specific, very situation specific so I have to, you know, kind of explain all
that stuff at the beginning. So anyway all of that stuff said, the actual
question that we're here to answer is whether or not a landlord has to pay
interest kind of like a bank does, for example, on a security deposit that they
hold for a tenant. And the answer to that question actually comes in three parts
which I'll go over right now. The first part of that answer is what the state
requires and the state of California does not require interest be paid on a
security deposit. There is no specific kind of statute on this because there is
no law on it. There is a case on it, however, and the case is called Korens.
Korens. I'll write that over here as well as write it down below in the
description for you so if you're so inclined, look it up on google scholar or
something similar and you should, you know, find it pretty easily. But the basic
idea in Korens was that a tenant sued her landlord demanding that he pay
interest on, you know, the security deposit that she had given him and the
court went through its analysis and basically concluded that there is no
requirement in California law that a landlord pay interest in that way.
Moreover, actually, in the Korens case, the court also basically said that the
legislature in California had had a lot of opportunities to pass a law that did
require landlords to pay interest and that the legislature in each situation
had declined to pass such a law. So number one is that
the state of California does not require the landlord to pay interest. However, I
think it was the fourth part of the disclaimer that I mentioned, regardless
of what the state requires, it is possible for a city or county to say
well, you know, regardless of what the state says we, you know, in LosAngeles
County or we in San Francisco County, etc. are basically going to pass a law that
says you if you're a landlord in our city, in our county, you have to pay interest in
accordance to these terms. So if you happen to live in a city or county that
has local laws and local ordinances on, you know, landlord-tenant situations like
houses, apartments, things like that, you need to check to see whether or not your
local rules do require that you pay interest if you're a landlord. So I guess
regardless then of whether or not the state requires it or whether or not the
county or the city require it, if for whatever reason, the landlord decides
that it is, you know, beneficial for them to pay interest in some way, can they
reach an agreement with the tenant to do so? Sure, um, I guess I'm struggling a little
bit to see why a landlord would do that but, you know, to each landlord their own, but basically
the idea is that if the landlord wants to, they can put a clause in their lease
that says 'Yes I will pay you interest on your security deposit of one percent,
half a percent, something like that, and you know, the like, that clause of the
lease should basically also say this interest will be computed in this way, it
will be due at this time, it's not something the tenant can, you know, you
know, withdraw right away or maybe it is. So whatever terms the landlord
decides are beneficial to them, the landlord and the tenant can, you know, put
that in writing and add it to a part of their lease. So anyway, hopefully that
wasn't too confusing. To summarize then, the state of California does not require
interest to be paid on a security deposit. However a city or county can
choose to pass its own laws or its own rules about interest, how much has to be
paid, when it has to be paid, etc but then regardless of what the city or the
county require, the individual landlord and tenant can come to an agreement
on their own about how much interest to pay, when to pay it, etc but that part
needs, er, should be written into the lease between the parties. So hopefully that
wasn't too confusing. Speaking for just me, when I was renting property, I
actually did wonder about this interest thing quite a lot. You know it was
nothing more than a passing curiosity, I think, because the money involved
generally is going to be fairly small, like we're not talking thousands of
dollars at a really high interest rate or something so it was more just a
curiosity, but if you are like me and you always wondered about this then, you know,
now you have your answer, I guess. So, anyway, again hopefully that helped,
wasn't too confusing, you know, like this video, share it, comment, subscribe all
that nice stuff and I will talk to you guys next time. Thanks.