Security Deposit Bank Account for Tenants

7 Replies | Baltimore, Maryland

Hey again all,

So I'm just finding out that there is a law requiring tenant's security deposits to be held in a separate account at 3% annual interest. Is this true?

If so, are these types of accounts common with local/national banks? Any recommendations or insight is much appreciated! 

Security deposit requirements varies by state and local landlord tenant laws. I just replied to a post on security deposits in Virginia, and state law there is: 

"All security deposits in Virginia must earn interest at an annual rate that is four points below the Federal Reserve's discount rate as of January 1."

I owned properties in NYC and I don't have to deposit security checks into security accounts for under 5 units. But in MA, I have to and the tenant gets a annual report on it. You'll have to tell us where the property is. Then there are regulation on interest rates.

Hey Frank my bad on that, I thought I put that in there. It's in Baltimore, so it says that they have to be held in an account specifically for deposits, at a rate of 3% I believe. 

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Originally posted by @Connor Corkrin :

Hey Frank my bad on that, I thought I put that in there. It's in Baltimore, so it says that they have to be held in an account specifically for deposits, at a rate of 3% I believe. 

 Here's the Maryland tenant security deposit law: Maryland tenant security

It does have the 3% requirement for deposits over $50.00. And in NYC when I last check, banks do have special accounts for tenant security, so you have to check around. in MA, I had them, and the tenant and I get annual updates. Banks here in NYC even provide accounts where if you own multi's, it's one account with sub accounts. I owned triplexes here, so I didn't need them. Technically, I can subtract handling fees in one of these jurisdictions.

Here is the actual requirement from MD Attorney General website:

When returning security deposits of $50 or more, the landlord must include simple interest of 3 percent per year, accrued at monthly intervals from the date the security deposit was paid for all tenancies that were initiated prior to January 1, 2015. For tenancies that began on or after January 1, 2015, the interest rate is payable at 1.5 percent a year OR the simple interest rate accrued at the daily U.S. Treasury yield curve rate for one year, as of the first business day of each year, whichever is greater. The Maryland Department of Housing and Community Development has a Rental Security Deposit Calculator on its website at http://www.dhcd.maryland.gov to help you calculate this interest rate. A landlord must pay 4 percent on deposits held before Oct. 1, 2004.

In addition, make sure you give a receipt for the deposit (may be written received in lease, or it's an additional $25 penalty).  The bank doesn't have  to pay you the 3%, but you still have to pay the tenant 3%.  We were making 0% interest in that account in 2014-2015, but still had to pay 3% interest when we returned their deposit.  It was a cost of doing business in Annapolis.  

There is a calculator to determine your interest owed to the tenant. You are responsible for paying that money, there is not an account that pays the amount.