Mandate for interest on security deposits dropped – but legislation still bad

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Sen. Mark Leno’s SB 603 would no longer require that landlords pay interest on security deposits, but his bill is still bad for the rental housing industry.

Sen. Mark Leno

Sen. Mark Leno

The interest-on-security-deposits provision came out after CAA’s strong lobbying activities and nearly 800 CAA members wrote opposition letters to lawmakers.

Remaining, however, are unfair penalty provisions for landlords who fail to return security deposits as required by law – no matter the rationale.

Under SB 603, 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.

SB 603 removes a judge’s discretion, mandating high penalties for any security deposit error, even a minor mistake, such as with calculating deductions. All mistakes would be treated as if committed in bad faith.

This would lead more tenants to challenge their deposit in court return since any degree of victory would mean getting back not only the entire security deposit back – but also penalties and actual damages.

CAA will continue to strongly oppose the bill and will keep you posted on the outcome of the floor vote.

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