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Interest on Security Deposits in
Maryland
As of October 1, 2004, the amount
of interest that a landlord must pay on a security deposit was reduced
from 4% to 3%.
House Bill 723
In Maryland, landlords are allowed to request a security deposit. The landlord will hold that security deposit until the tenant
moves out or is evicted. A tenant has 45 days to request that the
security deposit plus interest be returned. More on getting a security deposit back. During the time that the landlord holds the
tenant’s security deposit, s/he is responsible for adding 3% interest
per year on to the initial total. The interest that is due is "simple".
Simple interest means that the landlord will not pay "interest on the
interest". S/he must pay interest only on the security deposit, not on
the accumulated interest from past years.
What if I already have a lease on October 1, 2004? The Maryland Attorney
General issued an opinion about
what rate of interest you will be paid.
- If your lease says that the interest rate as "4%", then the landlord must pay that rate as long as the lease is in effect (even if the lease extends beyond October 1, 2004.)
- If your lease does not specify a number for the interest rate but says something like "a rate that is consistent with Maryland law", the interest will be computed in 6 month periods. For example, if you entered into a lease and paid a security deposit on February 1, 2004, the first six months would end as of August 31, 2004. The second 6 month would start on September 1, 2004. The landlord should pay 4% for the first 6 month period (because the period ended under the old law). However, the landlord would only need to pay 3% on the second 6 month period because the period ended after the new law took effect.
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