Interest on Security deposits in Pennsylvania

[Margie Sturtz]

Hi, I'm a bookkeeper at a real estate co in Philadelphia. Question...with interest rates so low is it acceptable to hold off sending out interest checks to tenants over 2 years and just give them the earned interest with their security deposit when they move out? 

[Linda Liberatore]

In Chicago security deposit interest is part of the Chicago Residential Landlord Tenant Ordinance and changes annually.

Most of our clients have chosen to issue a credit letter annually at the time of lease renewal applying the reduction to the rent due.  Include a copy of the specific rates (published on the City's website) and request a signed copy returned for the resident file. With the current rates the amount of the check is most often less than $5 - $10.

The really negative impact are cases in court pending eviction and the free legal team for the tenant will request copies of proof security interest has been paid in previous years.  If the landlord cannot produce documents the legal system can fine thousands of dollars in comparison to the pennies that were due annually. By the way the free tenant attorney will then be billed to the landlord if they lose the eviction proceedings. 

In the Chicago area many are abandoning security deposits due to the oppressive financial backlash this has generated when trying to evict a tenant.

Security Deposit Interest Rates

Chapter 5-12 of the Chicago Municipal Code hereby gives notice that the rate of interest on security deposits under rental agreements from Jan. 1, 2016 through Dec. 31, 2016, shall be:

0.01%

Hope that helps!