Bill on security-deposit interest advances


A bill that would require landlords to pay interest on security deposits advanced Tuesday from the Senate Judiciary Committee and is headed for the Senate floor for a vote as early as next week.

The legislation, SB 603 by Mark Leno, D-San Francisco, 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.

Sen. Mark Leno

Sen. Mark Leno

Along with the requirement for interest payments, the bill includes a second troubling proposal: With no consideration for the owner’s rationale, a small claims court judge must 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 he or she concludes that the owner withheld the deposit in “bad faith.” The bad faith requirement would go away under SB 603.

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.