From the Forum – My rights regarding interest on my security deposit?

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My rights regarding interest on my security deposit?

“I’m hoping someone knows more about this than I do – I rent an apartment in a row house in DC and from what I understand, DC tenants are able to be returned their security deposit with interest within 45 days of their departure from their apartment (assuming no damage is found, etc.)

As I’m preparing to move out, I realized that I signed the lease nearly two years ago and it says that in there that the security deposit will be returned to the tenant without interest.

Did I sign away my right to collect this interest? Is this legal? Obviously I signed and it’s my own fault if that happened, but I want to make sure that it’s within their right to have that in the terms of the lease agreement.”

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25 Comment

  • If your lease says the deposit will be returned without interest, then that’s probably binding as it’s a contract both parties agreed to (I don’t know if there is DC landlord-tenant law that might override it). But the reality is that they’d only have to pay you interest at the current savings rate, so you’re talking about fighting for interest of less than 1% of whatever your deposit was. $1500 deposit, interest over two years = about $25-30. Worth your time?

  • Interest rates on low-risk accounts (e.g., savings accounts) over the last 2 years are <1%. You are talking about a fairly small amount of $. Just sayin'

  • After 2 years it wouldn’t even amount to $10 with interest rates what they are. Not worth the hassle. And yes, it is a legal term.

  • No, its not legal. You are owed the interest.

    But don’t get your hopes up for a massive payday. The interest is based off of the savings account rate of any financial institution that your landlord is using to store the security deposit. Considering some savings account rates are about .%5, you would be due about $15.00 for the past two years. Yeehaw

  • Since you signed a contract waiving your interest payment, you’d need to fight this in court. And for the minuscule amount of lost interest, it’s not worth it unless you perversely enjoy that kind of thing.

  • District law requires landlords to pay interest on security deposits.

    14 DCMR 308.3 All monies paid to an owner by tenants for security deposits or other payment made as security for performance of the tenant’s obligations shall be deposited by the owner in an interest bearing escrow account established and held in trust in a financial institution in the District of Columbia insured by a federal or state agency for the sole purposes of holding such deposits or payments.

    14 DCMR 308.7 The housing provider shall post in the lobby of the building and rental office at the end of each calendar year, the following information: Where the tenants’ security deposits are held and what the prevailing rate was for each 6-month period over the past year. At the end of a tenant’s tenancy, the housing provider shall list for the tenant the interest rate for each 6-month period during the tenancy.

    14 DCMR 309.1 Within forty-five (45) days after the termination of the tenancy, the owner shall do one of the following:

    (1) Tender payment to the tenant, without demand, any security deposit and any similar payment paid by the tenant as a condition of tenancy in addition to the stipulated rent, and any interest due the tenant on that deposit or payment as provided in paragraph (4)(a) and (a-1) (14 DCMR § 311)

    14 DCMR 311.1 The interest in the escrow account described in § 309 on all money paid by the tenant prior to or during the tenancy as a security deposit, decorating fee, or similar deposit or fee, shall commence on the date the money is actually paid by the tenant, or within thirty (30) days after February 20, 1976, whichever is later, and shall accrue at not less than the statement savings rate then prevailing on January 1st and on July 1st for each 6-month period (or part thereof) of the tenancy which follows those dates. On those dates, the statement savings rate in the District of Columbia financial institution in which the escrow account is held shall be used. All interest earned shall accrue to the tenant except for that described in paragraph (4)(a-1) or as set forth in paragraph (2) (14 DCMR § 309).

    14 DCMR 311.2 Interest on an escrow account shall be due and payable by the owner to the tenant upon termination of any tenancy of a duration of twelve (12) months or more, unless an amount is deducted under procedures set forth in paragraph (2) (14 DCMR §§ 309.1 and 309.2). Any housing provider violating the provisions of this section by failing to pay interest on a security deposit escrow account that is rightfully owed to a tenant in accordance with the requirements of this section, shall be liable to the Rent Administrator or Rental Housing Commission, as applicable, for the amount of the interest owed, or in the event of bad faith, for treble that amount. For the purposes of this paragraph, the term “bad faith” means any frivolous or unfounded refusal to return a security deposit, as required by law, that is motivated by a fraudulent, deceptive, misleading, dishonest, or unreasonably self-serving purpose and not by simple negligence, bad judgment, or an honest belief in the course of action taken. Any housing provider who willfully violates the provisions of this section by failing to pay interest on a security deposit escrow account that is rightfully owed to a tenant in accordance with the requirements of this section shall be subject to a civil fine of not more than $ 5000 for each violation.

    Bottom line: yes, landlords must pay interest on security deposits.

  • A contract with terms that violate the law is unenforceable. Any contract that waives interest on a security deposit violates District law. See below.

  • Agreed. FWIW, a lot of small landlords use “form” leases that they find on the internet, so there are often terms that are not legal under DC law, which is significantly more tenant-friendly than most places. So just because something is in your lease, does not mean it is enforceable.

  • DC law should trump whatever your landlord put in the contact. And DC law is clear, all security deposits must be held in an interest bearing account.

  • For clarification, where most people are saying “less than 1%” in recent years, they mean on the order of 0.0 to 0.1%. You will be entitled to somewhere between zero and 2 dollars after a couple years.

  • You do have a right to collect interest, but unless your deposit was thousands and thousands of dollars, it’s not worth it because it won’t be much. Your landlord is required to provide you with the “interest available at a prevailing commercial bank that operates within the District”, but it does not specify the HIGHEST available interest rate. Since many big banks offer accounts with ZERO interest and many also offer basic, fee-based savings accounts that pay about 1% in interest, but also charge $1.95 per month, I’ve seen landlords screw tenants who got bitchy about it and say “Okay, you had a $2,000 deposit that could have earned $20 in interest this year at 1%. The fees on the account to get that 1% add up to $23.40. Here’s your $1996.60 thank you and by the way don’t use me as a landlord reference and by the way I’m keeping an extra $300 as a cleaning fee because you forgot to wipe down the microwave” and it’s totally legal. Now, if you have a group house with two months rent as the deposit and we’re talking about $12k or $14k here, that might be a *little* different, because over the years that’s at least a couple hundred bucks. But otherwise, let it go. Trust me. Besides, your lease says you aren’t entitled to it. But regardless, the important thing to remember is your security deposit is funds designed to guarantee housing – it’s not an investment vehicle. If you want a return on your money, buy stocks.

  • You might learn something and expand your perspective if your take a look at the real world and try to understand true housing costs.

  • I agree with much of what’s already here, but I’m a small-time landlord who a few years ago had a tenant make a demand for a few hundred bucks worth of interest on a $1200 deposit that I held for about 15 months, so I actually researched this and can’t hold back from adding my two cents. Here are the salient points:

    (1) DC law requires (a) that rental deposits be held in an interest-bearing account within the District and (b) that the security deposit be returned, with interest, absent any justified withholding.

    (2) The interest-bearing account only need to be something that pays the prevailing rate of interest for no-risk savings account (and neither tenants nor the law want deposit money to be held in a riskier, and higher interest account). For the last many years, you’re talking about maybe 0.1 % or something ridiculously low on such an account.

    So OP legally may be owed something less than $2. Whether s/he wants to make a stink about that with the landlord or not … well, I’d suggest the value of the time it took to write into POP with this inquiry and read these replies already has exceeded that amount. And almost certainly, if s/he may be in need of future rental references, assuming an otherwise positive relationship with the LL, it is definitely not worth leaving on this sour note.

  • Thanks everyone – you’re right, absolutely not worth the hassle.

  • One question about the interest: isn’t it compounded? That is, you get .1% for each month that the security deposit is held?

    So in the case of a $1500 security deposit and .1% for 2 years (24 months), that’s $1500 x (1.001)^24. Ends up being around $35 but quite a bit more than the $2 that some people are mentioning.

    Maybe I’m misinterpreting the laws regarding interest, but that’s how I read it.

  • Honestly, if you get your security deposit back at all you should count your blessings! Landlords are notoriously bad at giving it back without a fight.

  • To reiterate what others have said… It’s not legal and ABSOLUTELY not worth the effort.

    You’re talking MAYBE a dollar per year.

  • Easiest thing I’ve found to do to handle this is to add a new capitol one savings account containing only the security deposit. At the end of the term, close the account and send the tenant everything in it less damages. If they ask about the interest, you can just hand over the history for that account. But for your big payday, not really, I just checked and on a $1000 deposit the tenants have made a whopping $9 in interest after 18mo.

  • If you get the full deposit back hassle free, that is worth more than any piddly interest you might have earned. Just be glad you got it back easily and move on.

  • If you ask your landlord for $2 back you are owed, he’ll find a burned out light bulb needing replacement and charge you $5 for it. Better to take your deposit and go.

  • Here’s a real life example for you. Our tenant moved in 7 months ago, and made a $2300 security deposit. We deposited the money in an interest bearing account with Wells Fargo. As of today, the account is now at $2300.61.

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