Security deposit interest question

[Kelly Conrad]

Hey everyone! 

I'm writing out my lease (yes, my lawyer will be looking it over before I make it official), but I have a question about the security deposit interest I'm seeing. I was looking on Minnesota's page about this, but I'm a little confused about this:

Subd. 2.Interest.

Any deposit of money shall not be considered received in a fiduciary capacity within the meaning of section 82.55, subdivision 26, 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 three percent per annum until August 1, 2003, and one 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.

So, does that mean that the tenant's security deposit will gain an interest of 1% over the time of their lease? I don't recall having interest on our security deposit when we rented a long time ago, so I wasn't sure if this was required for Minnesota or if the 1% is what it's always been. I thought their deposit was held in a trust account, so does that just gain 1% on its own then?

Again, my lawyer is reviewing everything, but I am hoping that by doing my homework that she won't be spending a ton of time going through and fixing mistakes of mine, and I am just wanting to be sure I understand this correctly.

Thanks!

[Tim Swierczek]

Hi @Kelly Conrad , yes you must pay 1% interest on the damage deposit for the entire time the tenant has the deposit with you.  This is MN law and has been for many years.  It's possible your previous landlord broke the law, but that was very stupid of him or her, since 1% works out to almost nothing per year, and its an easy way for a tenant to beat you in court on a much larger issue.  You always want to appear to the courts to be a knowledgeable and law following landlord, and this is one of the easiest ways to do so.  The math would look like this.  

Deposit $1,300

Deposit retained 17 months

1300*.01= $13/year interest

13/12= $1.08 monthly interest

1.08x 17 months= $18.36 interest owed