MEMBER ALERT: Help CAA fight interest-on-security-deposits bill


The California Apartment Association is calling on its members to continue writing letters to  help defeat a bill that would require landlords to pay interest on security deposits.

The legislation, SB 603 by Mark Leno, D-San Francisco, would also dramatically increase penalties when they fail to return the deposits as required by law.

Sen. Mark Leno

On Monday, May 13, Leno passed on his first opportunity to present SB 603 for a vote on the Senate floor. His next opportunity comes Thursday, May 16.

The CAA letter-writing campaign to defeat the bill appears to be working. If you haven’t yet written a to your legislator, please click here and do so today.

The bill, which advanced from the Senate Judiciary Committee on a 4 to 1 vote Tuesday, May 7, does not make financial sense for tenants or landlords. Under SB 603, a tenant would receive less money in interest than the costs incurred by his or her landlord to account for and return the security deposit.

Along with the requirement for interest payments, the bill includes a second troubling proposal: With no consideration for the owner’s rationale for withholding a tenant’s security deposit, a small-claims court judge would have to award penalties against the owner if the tenant successfully demonstrates that all or a portion of the deposit should have been returned.

Under current law, a judge only awards penalties if the judge finds that the owner withheld the deposit in “bad faith”. No bad faith finding would be required if this bill were to become law.

With the change to the penalty provisions of the law, more tenants would surely challenge their deposit return. Any degree of victory would mean getting all of a security deposit back, plus penalties and actual damages.




  • The real problem is tenants that move out without paying the last month’s rent. Their attitude is that the security deposit is for the last month’s rent – not for the damage that they do during their tenancy.
    With regard to interest on the security deposit, Mr. Leno is wasting everyone’s time with this. Surely, their are real problems for our legislators to work on.

  • I am confused about the requirement that interest be paid on security deposits. Does effect a security deposit I must return to my tenant that I have held for several years? If so, how would I be able to determine how much interest was earned on the deposit? I have had the same tenant for nine (9) years and if she were to move out soon and this bill becomes a law, how would this impact how much security deposit please interest $$ I owe her? Or will this bill be effective only for new tenants after if it is approved? The greatest burden will be for people like me who own only one piece of property that they rent.

  • Most rentals are managed by professional property management companies. The increased cost of accounting to the property manager will result in increased management fees to the owner. This will most likely increase rents to cover the costs involved in implementing the new accounting practice. Not only will tenants not benefit from this bill, it could end up costing them much more in increased rents.