Q: My tenants are moving out of the house they have been renting for the last three years. They have been very good tenants, and have consistently paid their rent on time, each and every month. I have held a security deposit since they first moved in, and now my tenants claim that they are entitled to interest on that deposit. Can you advise?
A: Chances are, you will owe interest on the security deposit. You did not give me the location of your house, and since the laws in the surrounding Washington metropolitan area jurisdictions vary, I will go over the various requirements, jurisdiction by jurisdiction.
I am assuming, of course, that the rental is residential, and not commercial. If you were renting your house for commercial purposes--for example, to a doctor--then the tenant would not be entitled to interest on the security deposit. Generally speaking, for commercial leases, in the absence of a specific provision in the lease regarding the payment of interest on a security deposit, the landlord is not obligated to pay any such interest.
Let's look briefly at the three jurisdictions for the rules regarding residential tenants:
District of Columbia--Whether or not the landlord is covered under rent control, the security deposit law applies. Under this law--which is an amendment to the D.C. housing regulations--the security deposit required by a landlord may not be more than the equivalent of the first full month's rent. The landlord must deposit the money in an account bearing at least 5 percent per annum interest. Within 45 days after the tenancy ends, the landlord must either return to the tenant the security deposit plus interest, or notify the tenant in writing that the security deposit is to be applied toward the cost of any damages. If the landlord applies the security deposit toward the damages, he or she must return the balance of the deposit (if any) within 30 days of notification to the tenant, giving the tenant an itemized list of the repairs made and the cost of each repair.
Maryland--The maximum amount that may be imposed as a security deposit in Maryland is two months' rent, or $50, whichever is greater. The landlord must deposit this amount in an interest-bearing account, bearing interest of at least 4 percent simple interest per annum, to accrue at six-month intervals. Prior to July 1, 1980, the interest rate was 3 percent per annum. The landlord must return the security deposit, and any accrued interest, within 45 days after the end of the tenancy, less any damages. If any amount is applied toward damages, the landlord--as in the District of Columbia--must provide the tenant with a written list of damages and the actual cost incurred within 30 days after the tenancy ends.
Virginia--The Virginia security deposit law applies only to multi-unit dwellings or to single-family housing if the landlord owns 10 or more properties in the state. The landlord must place the security deposit in an interest-bearing account of at least 4.75 percent per annum, if the lease was signed after July 1, 1982. Prior to that date, the interest requirement was 4 percent per annum. The deposit and accrued interest must be returned to the tenant within 30 days of the termination of the tenancy. Interest accrues at six-month intervals, and is only payable if the tenant has resided in the property for at least 13 months.
All of the jurisdictions have very active landlord/tenant commissions, and they will be more than happy to give you advice and information. Many of these commissions also have helpful publications. For additional information, here are their numbers:
Arlington Tenant/Landlord Affairs Office: 558-2355.
Fairfax Tenant/Landlord Relations: 691-3214.
Montgomery County Landlord/Tenant Affairs Office: 251-2577.
Prince George's Landlord/Tenant Commission: 952-3200.
District of Columbia Rental Accommodations Office: 724-5600.