Tenant Security Deposits

A security deposit (also called Last Months Rent, Damage Deposit, etc) is considered to be any monies held in escrow by the landlord.  The laws regarding security deposits are applicable regardless of rent control status.

Moving In/Out and Wear & Tear

A landlord may require a security deposit prior to a tenant moving in. Often the security deposit I used to offset expenses relating to damage done to the premises during the tenant’s rental period. Typically the security deposit covers damages beyond “normal wear and tear”. The law does not define wear and tear though so it is advisable that the tenant and landlord note the condition of each room in writing prior to moving in so that all potential discrepancies are noted, agreed upon, and signed by both parties. The same document can be used as the basis for the “walk through inspection” with the landlord prior to vacating.

Ownership changes

If ownership of the property changes during the tenancy, the landlord may either transfer the deposit to the new owner or return the deposit to the tenant. Tenants should make sure that their lease reflects the actual amount held as deposit before ownership changes.

How long does a landlord have to return a security deposit after a tenant moves out? 

A landlord must return the full security deposit and/or give the tenant a full written itemization of any amounts withheld within three weeks of the tenant vacating the premises.   Language stating that a security deposit is non-refundable is not enforceable. 

Interest On Security Deposits

Landlords are required to pay the tenant interest on their security deposit when the security deposit is returned.  The calculation of this interest is complex though recent efforts have been made by the rent board to simplify the process. 

In 2002 the law governing the calculation of interest was changed.  Ordinance 107-02 allowed the Rent Board to calculate the interest rate. The rate is the average of 12 monthly Federal Reserve Discount Rates and is calculated and announced the first week of January using the previous 12 months of interest rate data. This rate is in effect from March to February of the next year.    

BUT WAIT…..

In June 2003 an amendment to this ordinance was passed requiring the use of only one interest rate to calculate the interest owed a tenant. That is, a landlord must only calculate the interest due using the rate in effect at the time the interest is due.

BUT WAIT….AGAIN

For interest due from security deposits held prior to June 15, 2003, the landlord may have to calculate interest due using multiple rates from multiple years. Contact the rent board for exact instructions as to how to calculate this.

Announced Interest Rates on Security Deposits   

3/1/06 - 2/28/07      3.7%

3/1/05 - 2/28/06      1.7%

3/1/04 - 2/28/05      1.2%

3/1/03 - 2/29/04      1.2%

8/4/02 - 2/28/03      3.4%

9/1/83 - 8/03/02      5.0%

The Rent Board Fee

The Rent Board Fee will be deducted from interest payments made on security deposits.  The City of San Francisco collects a per unit fee to fund the Rent Board.  For the 2005-2006 tax year, the rental unit fee is $20.00 per apartment unit and $10.00 per residential hotel room. The rent board fee must be deducted from the interest due the tenant on the security deposit held unless the landlord has paid the interest payment annually to the tenant. In those instances, the owner can bill separately for the fee as long as the interest is paid annually to the tenant. Where no deposit is being held, the owner would bill directly for the fee. 

Landlords may now “bank” the fee and collect it in later years. This means that a landlord does not have to collect the fee in the year that it was due, but is entitled to “bank” or collect the Rent Board fee in later years. This change only applies to fees imposed from November 1999 on.  Landlords who failed to collect the Rent Board fee for years prior to 1999 will not be able to collect those fees under this provision.

Amount of Rent Board fees a landlord can "bank":

1999 – $16.00

2000 – $16.00

2001 – $16.00

2002 – $21.50

2003 – $21.50

2004 – $11.00