Rent Stabilization Board
Rent Stabilization Board

CHAPTER 7. SECURITY DEPOSITS

CONTENTS

701 Security Deposits

702 Payment of Interest on Security Deposits

703 Payment of Interest where Funds are not Deposited - REPEALED December 17, 2004

704 Deduction of Interest from Rent

705 Prohibiting the Increase of Security Deposit during a Tenancy

706 Refund of Security Deposit

707 - 799  (RESERVED)

 


701. Security Deposits

(A) Any security deposit or payment, as that term is defined in Section 7 of the Ordinance, shall be held by the landlord in a fiduciary capacity for the benefit of the tenant until such time as it is returned to the tenant or entitled to be used by the landlord pursuant to Section 1950.5 of the California Civil Code.

(B)  Until such time as it is returned to the tenant or is entitled to be used by the landlord as provided in Civil Code section 1950.5, the security deposit or payment shall accrue simple interest at the rate equal to the average rates of interest paid on six-month certificates of deposit by insured commercial banks.  The Rent Board shall compute and publicize the interest rates applicable under this section as provided in Regulation 702 on an ongoing basis.  

(C) The 12 month average of the rates of interest paid on six-month certificates of deposit by insured commercial banks as published by the Federal Reserve Board on the first business day of each month for each calendar year since 1980 is set forth in the following table:

Year

Rate

 

Year

Rate

1980

13.6%

 

1996

  5.5%

1981

15.0%

 

1997

  5.7%

1982

12.8%

 

1998

  5.5%

1983

  9.2%

 

1999

  5.4%

1984

10.7%

 

2000

  6.6%

1985

  8.3%

 

2001

  3.8%

1986

  6.6%

 

2002

  1.8%

1987

  6.9%

 

2003

  1.2%

1988

  7.8%

 

2004

  1.6%

1989

  9.1%

 

2005

  3.4%

1990

  8.3%

 

2006

  5.1%

1991

  6.0%

 

2007

  5.3%

1992

  3.8%

 

2008

  3.4%

1993

  3.4%

 

2009

  1.1%

1994

  4.8%

 

2010

  0.4%

1995

  6.0%

 

 

 

[Amended 8/08, removed wording in Section (B) “as published by the Federal Reserve Board” and added “as provided in Regulation 702” in last sentence of (B); amended 3/10 to correct (C) 2007 rate to 5.3% and added rates for 2008 and 2009; amended 2/11 to correct (C) with 2008 rate of 3.4% and added rate for 2010.]

 


702. Payment of Interest on Security Deposits

(A) Once a year in December, the landlord shall return to each tenant the amount of interest accrued by the tenant’s security deposit through October 31 of that year either as a rent rebate or cash payment.

(B) Except as provided in subdivision (C), the interest payable in December of each year shall be at the rate equal to the 12-month average of the average rates of interest paid on six-month certificates of deposit by insured commercial banks as published in Federal Reserve Board Statistical Release H.15 on the first business day of each month for the prior twelve months ending on November 1, rounded to the nearest tenth.  The Board shall compute and publicize the 12-month average of the average rates of interest paid on six-month certificates of deposit on an ongoing basis.  In the event the Federal Reserve Board fails to publish the H.15 Statistical Release for a particular month, the Board shall use the Board’s most recent published 12-month average as the monthly rate for each month where no H.15 rate is published for the purpose of calculating the 12-month average.

(C) For a tenant’s security deposit that has been held in an insured account at a bank or savings institution located within the City of Berkeley for the twelve months ending October 31st or since the tenancy began if the tenancy has existed for less than twelve months, the interest payable in December of each year shall be at the rate equal to the 12 month average of the average rates of interest (APY) paid on the first business day of each month for six-month certificates of deposits ($5,000 minimum deposit) by insured commercial banks doing business in the City of Berkeley provided that, at the time the interest is returned to the tenant, the landlord furnishes the tenant and the Rent Board with the identity of the bank account on a form provided by the Board.  The Rent Board shall compute the interest rate applicable under this subdivision by averaging the interest rates offered for six-month certificates of deposit on the first business day of each month by commercial banks that are located in the City of Berkeley.  A landlord who returns interest as provided in this subdivision but who is unable to verify to the Rent Board that the security deposit was held in an insured account at a bank or savings institution located within the City of Berkeley for the full time stated or who fails to comply with the requirements of this subdivision shall pay interest on the deposit at the legal rate of interest on unpaid judgments as provided in Code of Civil Procedure section 685.010.   

(D) (1) Upon the tenant’s departure from the premises, the balance of any interest accrued since the last October 31st shall be paid at the applicable average monthly rate for the 12 months immediately preceding the date of departure and shall be returned to the tenant along with the appropriate part of the principal and any prior unpaid interest. 
(2)  For terminating tenancies that spanned the immediately preceding October 31st, the applicable rate upon departure shall be computed on the same basis as the interest paid for the immediately preceding annual interest payment.
(3)  For terminating tenancies that commenced on or after the immediately preceding November 1st, the applicable rate shall be the rate computed pursuant to Subdivision (C) if the deposit was held in an insured account at a bank or savings institution located within the City of Berkeley for the duration of the tenancy and, at the time the interest is refunded, the landlord furnishes the tenant and the Rent Board with the identity of the bank account on a form provided by the Board; otherwise the applicable rate shall be the rate computed pursuant to Subdivision (B). 
(4) For tenancies terminating between November 3, 2008, and October 31, 2009, the applicable rate may be computed pursuant to Subdivision (C) only if the departing tenant’s deposit was held in an insured account at a bank or savings institution located within the City of Berkeley from November 3, 2008, to the date of departure. 

(E)  If a landlord has not previously returned interest to which a tenant is entitled, the landlord shall return to the tenant all interest earned on said security deposit which has accrued from June 28, 1980, or the date of commencement of tenancy, whichever is later, until the date upon which the payment was made.  Except as provided in Regulation 704, interest that accrued and was not returned to the tenant prior to December 31, 2004, shall be at the actual rate that the deposit earned or, if the actual rate cannot be established by documentation, the rate for each calendar year or part thereof shall be equal to the 12 month average of the average rates of interest paid on six-month certificates of deposit by insured commercial banks as published by the Federal Reserve Board on the first business day of each month during that calendar year, as printed in the table contained in Regulation 701(C). 

[Amended 8/08, changed Sections (C) to (D) and (D) to (E) and added a new Section (C); Amended 2/10, added Sub-sections (2), (3) & (4) to Section (D); Amended 4/11, changed Section (D)(1); Amended 10/13, added last two sentences to Section (B).]

 


703. Payment of Interest Where Funds are not Deposited Repealed December 6, 2004

 


704. Deduction of Interest from Rent

Where a tenant has not received refund of security deposit interest by January 10 of any year for any preceding calendar years, the tenant may recover the interest by deducting the interest amount from rent, under the procedure in this regulation. For purposes of this regulation, the interest rate for the immediately preceding calendar year is the legal rate of interest on unpaid judgments pursuant to California Code of Civil Procedure section 685.010 [currently 10%] or, if the security deposit is in the form of an advance payment of six or more months rent, twenty percent simple interest per year. For all other preceding years, the interest rate shall be as set forth in the table contained in Regulation 701(C). The tenant must first give the landlord fifteen days' notice in writing of the tenant's intention to deduct the interest from a future rent payment. The landlord may respond to the notice by paying the tenant the interest at the rate provided in this section prior to the date that the deduction from rent is to be made.

[Effective Date: May 25, 1990; amended November 5, 1999; amended April 4, 2005.]

 


705. Prohibiting the Increase of Security Deposit during a Tenancy

(A) Except as provided in subsection (B), any amount demanded, accepted or retained by a landlord as a security deposit within the meaning of Section 1950.5 of the California Civil Code shall not be increased for any tenant during the term of the tenancy. Landlords may demand, accept or retain the amount of security allowed in Civil Code Section 1950.5 upon the commencement of a new tenancy.

(B) With the written consent of the tenant and only to the extent allowed by state law, a landlord may collect and retain additional security during the tenancy as consideration for allowing the tenant to keep a pet or pets at the premises where such pet ownership was not previously permitted.

[Effective July 19, 1991, amended June 6, 2005 by adding Subsection (A) and (B)]

 


706. Refund of Security Deposit

(A) Any portion of a security deposit retained by a landlord in violation of Civil Code section 1950.5 is deemed to be a rent overcharge subject to recovery by the tenant under Regulation 1271.

(B) Unless otherwise agreed by the landlord and tenant, a landlord shall not be required to refund any portion of a security deposit until twenty-one (21) days after the landlord recovers possession of the rental unit. A landlord does not recover possession of a rental unit unless the premises are free of all occupants, including tenants, subtenants, guests, licensees, and squatters who entered the premises with knowledge and consent of the tenants or subtenants while the unit was in their possession.

(C) A co-tenant who vacates a rental unit and who is not reimbursed for his or her security deposit by the remaining or incoming co-tenant(s) or subtenants shall be entitled to recover his or her portion of the security deposit from the landlord in accordance with Civil Code section 1950.5 after the landlord has recovered possession of the rental unit as provided in Subsection (B). If a landlord was notified of a vacating tenant's retention of his or her rights to a security deposit and of the vacating tenant's forwarding address, the landlord shall mail or deliver the refund and/or itemization, in accordance with Civil Code section 1950.5(f), to the tenant's forwarding address. A tenant's failure to provide the aforementioned notice shall not by itself constitute a waiver of the tenant's right to his or her security deposit. The one-year period for acceptance of petitions by former tenants set forth in Regulation 1206(D) shall not begin to run with respect to petitions seeking a refund of security deposit until possession of a rental unit is recovered by the landlord.

[Effective 7/9/99]

 


707 - 799 (RESERVED)

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