Legal Q&A: Do I have to pay a tenant interest on his security deposit?


Question:  Do I have to pay a tenant interest on his security deposit?

Answer: There are no state laws requiring that interest be paid on the tenant’s security deposit. However, some rent control ordinances and/or other local ordinances do require interest to be paid.

Question: Our tenants have just informed us via telephone that their rent check will bounce, they don’t plan to cover it, and they intend to vacate the premises by the end of this month. They want us to use the majority of their security deposit as last month’s rent. If we don’t give a three-day notice to pay or quit and proceed with an eviction, are we leaving ourselves more vulnerable?

Ted Kimball
Kimball, Tirey & St. John LLP

Answer: If you do not proceed with a three-day notice followed up by an eviction, you could find that the tenants decide to change their minds and not move out after all, prolonging their time in possession without paying rent. The extra “motivation” is often worthwhile. In addition, the eviction will also give you a judgment for rent owed, plus court costs and if you have an attorney fee clause in your lease, attorney fees.

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