Beverly Hills : Interest on Rent Deposits

The City Council agreed Tuesday to study whether landlords should be required to pay interest on security deposits paid by renters living in rent-controlled apartments.

If the council adopts such a measure, Beverly Hills would join Los Angeles, West Hollywood, Santa Monica, Berkeley, Hayward, Palo Alto and East Palo Alto in requiring interest payments.

Although about 60% of the city’s residents live in apartments and condominiums, the requirement would apply only to rent-controlled units. City spokesman Fred Cunningham estimated that 20% to 30% of the 8,000 apartments and 1,600 condominiums in the city are covered by the rent-control law passed in 1978.

Several landlords who spoke at the council’s study session argued that the deposits and interest are needed for apartment maintenance and repairs and that the money belongs to the landlord until the tenant moves. They noted that landlords are required to pay federal income tax on the deposits.

Landlords also say that the interest on a deposit would be very small for each tenant and that the cost of administering the program would be prohibitive for landlords.

“We’re not trying to do the tenant out of his $1.50 (interest),” said Robert Magid, who owns a 30-unit building. “It’s like getting gold out of the ocean. We know it’s there, but it costs more to take it out.”

A renters group led by resident Herm Shultz argued that deposits on all rental units should be subject to interest.

However, the council agreed to limit its study to interest for rent-controlled residents, on the grounds that those residents are least able to negotiate for themselves.

“This is to protect a certain group of the population,” Councilman Maxwell Salter said.