State & Local Government Affairs
Security Deposits in Separate and/or
Interest-bearing Accounts: Abstract
The following spreadsheet is a 50-state statutory review of laws addressing the placement of
security deposits in separate, interest-bearing accounts. Currently, 25 states and the District of
Columbia address this issue.
When reviewing the attached spreadsheet, please note this document is divided into 4 separate tabs located at the bottom left corner of the screen. The first of the four tabs contains an
overview that breaks down the applicable state laws into three categories:
1) state laws that require owners and managers of residential rental property to pay a specific rate of interest to the resident upon the return of his/her security deposit,
2) state laws that govern whether security deposits can be commingled with other funds
and require owners and managers to place the deposit in a separate account or
3) state laws that require both; owners and managers must pay interest to the resident
upon the return of his/her deposit and place the deposit in a separate account.
The remaining three tabs contain citations and a brief description of each statute, categorized
by these three requirements.
In regard to laws governing residential security deposits, please note that some states permit
localities to enact laws that are more stringent than the requirements imposed by state law. As
it is difficult to monitor thousands of localities nationwide, NAA focuses on the applicable state
laws in this document and suggest that affiliates and members consult a local attorney for additional information on a specific locality.
Should you require further assistance, please contact the NAA Government Affairs staff. Please
note that this chart is intended to be used as a reference document, not as professional legal
guidance.
Chart updated by NAA staff April 2014
State Security Deposit Laws: Placement in Separate Account and Interest Payment Mandates
This is not intended for use as legal advice. Please note that statutes are divided into 3 categories on separate sheets.
*Please note this document contains multiple spreadsheets. See tabs below.
For more information, please contact:
Nicole Upano
Manager of State and Local Government Affairs
[email protected]
703-797-0646
Interest Only
Separate (No Interest Required)
Separate and Interest
Illinois
Alaska
Connecticut
Minnesota
Delaware
Florida
Ohio
Georgia
Iowa
New Mexico
Kentucky
Maryland
Virginia
Maine
Massachusetts
Michigan
New Hampshire
North Carolina
New Jersey
Oklahoma
New York
Tennessee
North Dakota
Washington
Pennsylvania
Washington, D.C.
States Requiring Interest be Paid on Security Deposits (Do not have to be held in separate account)
State
Statute
Description
California
None
Although not required at the state level, several cities in California subject to rent control require a landlord to pay a tenant interest on his or her
security deposit. See LA Municipal Code, Rent Stabilization Ordinance 151.06.02 (B) or San Francisco Administrative Code 49.2. A landlord who is
subject to the provisions of Section 1950.5 of the California Civil Code shall pay annually interest on all security deposits held for at least one year
for his or her tenants.
Illinois
765 ILCS 715/1, A lessor of residential real property, containing 25 or more units in either a single building or a complex of buildings located on contiguous parcels
765 ILCS 715/2 of real property, who receives a security deposit from a lessee to secure the payment of rent or compensation for damage to property shall pay
interest to the lessee computed from the date of the deposit at a rate equal to the interest paid by the largest commercial bank, as measured by
total assets, having its main banking premises in this State on minimum deposit passbook savings accounts as of December 31 of the calendar year
immediately preceding the inception of the rental agreement on any deposit held by the lessor for more than 6 months (715/1).
The lessor shall, within 30 days after the end of each 12 month rental period, pay to the lessee any interest, by cash or credit to be applied to rent
due, except when the lessee is in default under the terms of the lease. A lessor who willfully fails or refuses to pay the interest required by this Act
shall, upon a finding by a circuit court that he has willfully failed or refused to pay, be liable for an amount equal to the amount of the security
deposit, together with court costs and reasonable attorneys fees (715/2).
Minnesota
Minn. Stat. §
504B.178
New Mexico
N.M. Stat. Ann. Under the terms of an annual rental agreement, if the owner demands or receives of the resident such a deposit in an amount greater than one
§ 47-8-18 (A)(1) month's rent, the owner shall be required to pay to the resident annually an interest equal to the passbook interest permitted to savings and loan
associations in this state by the federal home loan bank board on such deposit.
Ohio
ORC Ann.
5321.16
Any deposit of money shall not be considered received in a fiduciary capacity within the meaning of section 82.17, subdivision 24, but shall be held
by the landlord for the tenant who is party to the agreement and shall bear simple noncompounded interest at the rate of 3 percent per annum
until August 1, 2003, and 1 percent per annum thereafter, computed from the first day of the next month following the full payment of the deposit
to the last day of the month in which the landlord, in good faith, complies with the requirements of subdivision 3 or to the date upon which
judgment is entered in any civil action involving the landlord's liability for the deposit, whichever date is earlier. Any interest amount less than $1
shall be excluded from the provisions of this section.
Any security deposit in excess of $50 or one month's periodic rent, whichever is greater, shall bear interest on the excess at the rate of 5 percent
per annum if the tenant remains in possession of the premises for 6 months or more, and shall be computed and paid annually by the landlord to
the tenant.
Virginia
Va. Code Ann. § The landlord shall accrue interest at an annual rate equal to 4 percentage points below the Federal Reserve Board discount rate as of January 1 of
55-248.15:1
each year on all property or money held as a security deposit. However, no interest shall be due and payable unless the security deposit has been
held by the landlord for a period exceeding 13 months beginning from the commencement date of the rental agreement or after the effective date
of any prior written or oral rental agreements with the same tenant, for continuous occupancy of the same dwelling unit until termination of the
tenancy and delivery of possession, such security deposit earning interest which begins accruing from the effective date of the rental agreement,
and such interest shall be paid only upon termination of the tenancy, delivery of possession and return of the security deposit.
States Requiring Only That Security Deposits be Placed in Separate Accounts (No Interest Required)
State
Statute
Description
Alaska
Alaska Stat. §
34.03.070(c)
All money paid to the landlord by the tenant as prepaid rent or as a security deposit in a lease or rental agreement shall be
promptly deposited by the landlord, wherever practicable, in a trust account in a bank, savings and loan association, or licensed
escrow agent, and the landlord shall provide to the tenant the terms and conditions under which the prepaid rent or security
deposit or portions of them may be withheld by the landlord; nothing in this chapter prohibits the landlord from commingling
prepaid rents and security deposits in a single financial account.
Delaware
25 Del. C. §
5514(b)
Each security deposit shall be placed by the landlord in an escrow bank account in a federally-insured banking institution with an
office that accepts deposits within the State. Such account shall be designated as a security deposits account and shall not be
used in the operation of any business by the landlord. The landlord shall disclose to the tenant the location of the security
deposit account. The security deposit principal shall be held and administered for the benefit of the tenant, and the tenant's
claim to such money shall be prior to that of any creditor of the landlord, including, but not limited to, a trustee in bankruptcy,
even if such money is commingled.
Georgia**
O.C.G.A. § 44-7- Except as provided in Code Section 44-7-32, whenever a security deposit is held by a landlord or such landlord's agent on behalf
31, O.C.G.A. §
of a tenant, such security deposit shall be deposited in an escrow account established only for that purpose in any bank or
44-7-32
lending institution subject to regulation by this state or any agency of the United States government. The security deposit shall
be held in trust for the tenant by the landlord or such landlord's agent except as provided in Code Section 44-7-34. Tenants shall
be informed in writing of the location of the escrow account required by this Code section (31).
As an alternative to the requirement that security deposits be placed in escrow as provided in Code Section 44-7-31, the
landlord may post and maintain an effective surety bond with the clerk of the superior court in the county in which the dwelling
unit is located. The amount of the bond shall be the total amount of the security deposits which the landlord holds on behalf of
the tenants or $50,000.00, whichever is less (32).
Kentucky
KRS § 383.580
(1)
All landlords of residential property requiring security deposits prior to occupancy shall be required to deposit all tenants'
security deposits in an account used only for that purpose, in any bank or other lending institution subject to regulation by the
Commonwealth of Kentucky or any agency of the United States government. Prospective tenants shall be informed of the
location of the separate account and the account number.
Maine
14 M.R.S. §
6038 (1)
All security deposits...must be held in an account of a bank or other financial institution under terms that place the security
deposit beyond the claim of creditors of the landlord or any other entity or person, including a foreclosing mortgagee or trustee
in bankruptcy, and that provide for transfer of the security deposit to a subsequent owner of the dwelling unit or to the tenant.
Upon the transfer of the dwelling unit, the new owner shall assume all responsibility for maintaining and returning to tenants all
security deposits accounted for and transferred pursuant to section 6035. Upon request by a tenant, a landlord shall disclose the
name of the institution and the account number where the security deposit is being held. A landlord may use a single escrow
account to hold security deposits from all of the tenants. A landlord may use a single escrow account to hold security deposits
from tenants residing in separate buildings if the buildings are owned by different entities as long as the different entities are
substantially controlled or owned by a single landlord.
**Landlord may, as an
alternative to placing
security deposit monies in
a separate account, post a
surety bond, which shall at
least equal the amount of
the deposit.
Michigan
MCLS § 554.604 The security deposit shall be deposited in a regulated financial institution. A landlord may use the moneys so deposited for any
purposes he desires if he deposits with the secretary of state a cash bond or surety bond written by a surety company licensed
to do business in this state and acceptable to the attorney general to secure the entire deposits up to $50,000.00 and 25% of
any amount exceeding $50,000.00. The attorney general may find a bond unacceptable based only upon reasonable criteria
relating to the sufficiency of the bond, and shall notify the landlord in writing of his reasons for the unacceptability of the bond.
The bond shall be for the benefit of persons making security deposits with the landlord. A person for whose benefit the bond is
written or his legal representative may bring an action in the district, common pleas or municipal court where the landlord
resides or does business for collection on the bond.
North Carolina
N.C. Gen. Stat. § Security deposits from the tenant in residential dwelling units shall be deposited in a trust account with a licensed and insured
42-50
bank or savings institution located in the State of North Carolina or the landlord may, at his option, furnish a bond from an
insurance company licensed to do business in North Carolina. The security deposits from the tenant may be held in a trust
account outside of the State of North Carolina only if the landlord provides the tenant with an adequate bond in the amount of
said deposits. The landlord or his agent shall notify the tenant within 30 days after the beginning of the lease term of the name
and address of the bank or institution where his deposit is currently located or the name of the insurance company providing
the bond.
Oklahoma
41 Okl. St. § 115 (A) Any damage or security deposit required by a landlord of a tenant must be kept in an escrow account for the tenant, which
account shall be maintained in the State of Oklahoma with a federally insured financial institution. (B) If the landlord proposes to
retain any portion of the security deposit for rent, damages or other legally allowable charges under the provisions of this act or
the rental agreement, the landlord shall return the balance of the security deposit without interest to the tenant within thirty
(30) days after the termination of tenancy, delivery of possession and written demand by the tenant.
Tennessee
Tenn. Code Ann. All landlords of residential property requiring security deposits prior to occupancy are required to deposit all tenants' security
§ 66-28-301(a) deposits in an account used only for that purpose, in any bank or other lending institution subject to regulation by the state of
Tennessee or any agency of the United States government.
Washington
Rev. Code Wash. All moneys paid to the landlord by the tenant as a deposit as security for performance of the tenant's obligations in a lease or
(ARCW) §
rental agreement shall promptly be deposited by the landlord in a trust account, maintained by the landlord for the purpose of
59.18.270
holding such security deposits for tenants of the landlord, in a financial institution as defined by RCW 30.22.041 or licensed
escrow agent located in Washington. Unless otherwise agreed in writing, the landlord shall be entitled to receipt of interest paid
on such trust account deposits. The landlord shall provide the tenant with a written receipt for the deposit and shall provide
written notice of the name and address and location of the depository and any subsequent change thereof. If during a tenancy
the status of landlord is transferred to another, any sums in the deposit trust account affected by such transfer shall
simultaneously be transferred to an equivalent trust account of the successor landlord, and the successor landlord shall
promptly notify the tenant of the transfer and of the name, address, and location of the new depository. If, during the tenancy,
the tenant's dwelling unit is foreclosed upon and the tenant's deposit is not transferred to the successor after the foreclosure
sale or other transfer of the property from the foreclosed-upon owner to a successor, the foreclosed-upon owner shall promptly
refund the full deposit to the tenant immediately after the foreclosure sale or transfer. If the foreclosed-upon owner does not
either immediately refund the full deposit to the tenant or transfer the deposit to the successor, the foreclosed-upon owner is
liable to the tenant for damages up to two times the amount of the deposit. In any action brought by the tenant to recover the
deposit, the prevailing party is entitled to recover the costs of suit or arbitration, including reasonable attorneys' fees. The
tenant's claim to any moneys paid under this section shall be prior to that of any creditor of the landlord, including a trustee in
bankruptcy or receiver, even if such moneys are commingled.
States Requiring that Interest be Paid on Security Deposits and that Deposits be Held in a Separate Account
State
Statute
Description
California
None
Although not required at the state level, several cities in California subject to rent control require a landlord to pay a tenant interest
on his or her security deposit. Berkley requires both interest be paid and deposits held in separate account. See Berkeley Municipal
Code section 13.76.070. Any payment or deposit of monies by the tenant shall be held by the landlord, in a fiduciary capacity for the
benefit of the tenant and 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 until such time as the payment or deposit is returned to the tenant or entitled to be used by
the landlord as provided in Civil Code Section 1950.5. The interest accrued by said payment or deposit through October 31st of each
year shall be returned to the tenant annually in December of each year.
Connecticut
Conn. Gen. Stat. §
47a-21 (h) & (i)
(h) Each landlord shall immediately deposit the entire amount of all security deposits received by him on or after October 1, 1979,
from his tenants into one or more escrow accounts for such tenants in a financial institution. Such landlord shall be escrow agent of
such account. Within seven days after a written request by the commissioner for the name of each financial institution in which any
such escrow accounts are maintained and the account number of each such escrow account, a landlord shall deliver such requested
information to the commissioner. (i) (1) On and after July 1, 1993, each landlord other than a landlord of a residential unit in any
building owned or controlled by any educational institution and used by such institution for the purpose of housing students of such
institution and their families, and each landlord or owner of a mobile manufactured home or of a mobile manufactured home space
or lot or park, as such terms are defined in subdivisions (1), (2) and (3) of section 21-64, shall pay interest on each security deposit
received by [him] such landlord at a rate of not less than the average rate paid, as of December 30, 1992, on savings deposits by
insured commercial banks as published in the Federal Reserve Board Bulletin rounded to the nearest one-tenth of one percentage
point, except in no event shall the rate be less than one and one-half per cent. On and after January 1, 1994 the rate for each
calendar year shall be not less than the deposit index, as defined in subdivision (2) of this subsection, for that year, except in no
event shall the rate be less than one and one-half per cent. On and after January 1, 2012, the rate for each calendar year shall be not
less than the deposit index, as defined in subdivision (2) of this subsection, for that year.
Florida**
Fla. Stat. § 83.49
(1) Whenever money is deposited or advanced by a tenant on a rental agreement as security for performance of the rental
**Account does not
agreement or as advance rent for other than the next immediate rental period, the landlord or the landlord's agent shall either:
have to be interest
(a) Hold the total amount of such money in a separate non-interest-bearing account in a Florida banking institution for the benefit of bearing
the tenant or tenants. The landlord shall not commingle such moneys with any other funds of the landlord or hypothecate, pledge, or
in any other way make use of such moneys until such moneys are actually due the landlord;
(b) Hold the total amount of such money in a separate interest-bearing account in a Florida banking institution for the benefit of the
tenant or tenants, in which case the tenant shall receive and collect interest in an amount of at least 75 percent of the annualized
average interest rate payable on such account or interest at the rate of 5 percent per year, simple interest, whichever the landlord
elects. The landlord shall not commingle such moneys with any other funds of the landlord or hypothecate, pledge, or in any other
way make use of such moneys until such moneys are actually due the landlord
Iowa**
Iowa Code §
562A.12(2)
All rental deposits shall be held by the landlord for the tenant, who is a party to the agreement, in a bank or savings and loan
association or credit union which is insured by an agency of the federal government. Rental deposits shall not be commingled with
the personal funds of the landlord. Notwithstanding the provisions of chapter 543B, all rental deposits may be held in a trust
account, which may be a common trust account and which may be an interest-bearing account. Any interest earned on a rental
deposit during the first five years of a tenancy shall be the property of the landlord.
Maryland
Md. REAL PROPERTY
Code Ann. § 8-203
(d) Maintenance of accounts or certificates of deposit in financial institutions; sale or transfer of landlord's interest. -(1) (i) The landlord shall maintain all security deposits in federally insured financial institutions, as defined in § 1-101 of the Financial
Institutions Article, which do business in the State.
(ii) Security deposit accounts shall be maintained in branches of the financial institutions which are located within the State and the
accounts shall be devoted exclusively to security deposits and bear interest.
(iii) A security deposit shall be deposited in an account within 30 days after the landlord receives it.
Massachusetts
ALM GL ch. 186, §
15B)(3)(a)
Any security deposit received by such lessor shall be held in a separate, interest-bearing account in a bank, located within the
commonwealth under such terms as will place such deposit beyond the claim of creditors of the lessor, including a foreclosing
mortgagee or trustee in bankruptcy, and as will provide for its transfer to a subsequent owner of said property. A receipt shall be
given to the tenant within thirty days after such deposit is received by the lessor which receipt shall indicate the name and location
of the bank in which the security deposit has been deposited and the amount and account number of said deposit. Failure to comply
with this paragraph shall entitle the tenant to immediate return of the security deposit
New Hampshire
New Hampshire RSA
540-A:6 (II) & (IV)
II. (a) Security deposits held by a landlord continue to be the money of the tenant and shall be held in trust by the person with whom
such deposit is made and shall not be mingled with the personal moneys or become an asset of the landlord until the provisions of
RSA 540-A:7 are complied with, but may be disposed of as provided in RSA 540-A:6, III.
(b) A landlord may mingle all
security deposits held by him in a single account held in trust for the tenant at any bank, savings and loan association or credit union
organized under the laws of this state in satisfaction of the requirements of RSA 540-A:6, II(a).
(c) A bond written by a company located in New Hampshire and posted with the clerk of the city or town in which the residential
premises are located in an amount equivalent to the total value of a security deposit held by the landlord on property in that city or
town shall exempt the landlord from the provisions of RSA 540-A:6, II(a) and (b).
IV. (a) A landlord who holds a security deposit for a period of one year or longer shall pay to the tenant interest on the deposit at a
rate equal to the interest rate paid on regular savings accounts in the New Hampshire bank, savings and loan association, or credit
union in which it is deposited, commencing from the date the landlord receives the deposit or from September 13, 1977, whichever
is later. If a landlord mingles security deposits in a single account under RSA 540-A:6, II(b), the landlord shall pay the actual interest
earned on such account proportionately to each tenant.
**Account does not
have to be interest
bearing
New Jersey**
N.J. Stat. § 46:8-19
Whenever money or other form of security shall be deposited or advanced on a contract, lease or license agreement for the use or
rental of real property as security for performance of the contract, lease or agreement or to be applied to payments upon such
contract, lease or agreement when due, such money or other form of security, until repaid or so applied including the tenant's
portion of the interest or earnings accumulated thereon as hereinafter provided, shall continue to be the property of the person
making such deposit or advance and shall be held in trust by the person with whom such deposit or advance shall be made for the
use in accordance with the terms of the contract, lease or agreement and shall not be mingled with the personal property or become
an asset of the person receiving the same.
The person receiving money so deposited or advanced shall:
a. (1) Invest that money in shares of an insured money market fund established by an investment company based in this State and
registered under the "Investment Company Act of 1940," 54 Stat. 789 (15 U.S.C. § 80a-1 et seq.) whose shares are registered under
the "Securities Act of 1933," 48 Stat. 74 (15 U.S.C. § 77a. et seq.) and the only investments of which fund are instruments maturing in
one year or less, or (2) deposit that money in a State or federally chartered bank, savings bank or savings and loan association in this
State insured by an agency of the federal government in an account bearing a variable rate of interest, which shall be established at
least quarterly, which is similar to the average rate of interest on active interest-bearing money market transaction accounts paid by
the bank or association, or equal to similar accounts of an investment company described in paragraph (1)
**This subsection
shall not apply to
persons receiving
money for less than
10 rental units
except where
required by the
Commissioner of
Banking and
Insurance by rule or
regulation. Also does
not apply to seasonal
rentals as defined.
New York
NY CLS Gen Oblig § 7- Whenever money shall be deposited or advanced on a contract or license agreement for the use or rental of real property as security
103
for performance of the contract or agreement or to be applied to payments upon such contract or agreement when due, such
money, with interest accruing thereon, if any, until repaid or so applied, shall continue to be the money of the person making such
deposit or advance and shall be held in trust by the person with whom such deposit or advance shall be made and shall not be
mingled with the personal moneys or become an asset of the person receiving the same, but may be disposed of as provided in
section 7-105 of this chapter
Whenever the
money so deposited
or advanced is for
the rental of
property containing
six or more family
dwelling units, the
person receiving such
money shall, subject
to the provisions of
this section, deposit
it in an interest
bearing account in a
banking organization
North Dakota
N.D. Cent. Code, § 47- The lessor of real property or a dwelling who requires money as a security deposit, however denominated, shall deposit the money in
16-07.1
a federally insured interest-bearing savings or checking account for the benefit of the tenant. The security deposit and any interest
accruing on the deposit must be paid to the lessee upon termination of a lease, subject to the conditions of subsection 2. A lessor
may not demand or receive security, however denominated, in an amount or value in excess of one month's rent, except if the lessee
is housing a pet on the leased premises, the security may not exceed the greater of two thousand five hundred dollars or an amount
equivalent to two months' rent.
A lessor is not
required to pay
interest on security
deposits if the period
of occupancy was
less than nine
months in duration.
Pennsylvania**
68 P.S. § 250.511b
(a) Except as otherwise provided in this section, all funds over one hundred dollars ($ 100) deposited with a lessor to secure the
**Account does not
execution of a rental agreement on residential property in accordance with section 511.1 and pursuant to any lease newly executed have to be interest
or reexecuted after the effective date of this act shall be deposited in an escrow account of an institution regulated by the Federal
bearing
Reserve Board, the Federal Home Loan Bank Board, Comptroller of the Currency, or the Pennsylvania Department of Banking. When
any funds are deposited in any escrow account, interest-bearing or noninterest-bearing, the lessor shall thereupon notify in writing
each of the tenants making any such deposit, giving the name and address of the banking institution in which such deposits are held,
and the amount of such deposits.
(b) Whenever any money is required to be deposited in an interest-bearing escrow savings account, in accordance with section
511.1, then the lessor shall be entitled to receive as administrative expenses, a sum equivalent to one per cent per annum upon the
security money so deposited, which shall be in lieu of all other administrative and custodial expenses. The balance of the interest
paid shall be the money of the tenant making the deposit and will be paid to said tenant annually upon the anniversary date of the
commencement of his lease.
(c) The provisions of this section shall apply only after the second anniversary of the deposit of escrow funds.
Washington, D.C.
CDCR 14-308, CDCR
14-309
308.3 All monies paid to an owner by tenants for security deposits or other payment made as security for performance of the
tenant's obligations shall be deposited by the owner in an interest bearing escrow account established and held in trust in a financial
institution in the District of Columbia insured by a federal or state agency for the sole purposes of holding such deposits or payments
(308). The owner, within 30 days after notification to the tenant pursuant to the requirement of paragraph (2)(a)(2) (14 DCMR §
309.1(b)), shall tender a refund of the balance of the deposit or payment, including interest not used to defray such expenses, and at
the same time give the tenant an itemized statement of the repairs and other uses to which the monies were applied and the cost of
each repair or other use (309.2).