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Shannon, Both Buyer and Seller in Richmond, VA

Do I have to return a security deposit to a tenant after they leave with interest? We are in VA.

Asked by Shannon, Richmond, VA Thu Feb 25, 2010

I saw in a book that Virginia says interest in due according to the "annual rate equal to 4% below the Federal Reserve Board discount rate as of Jan. 1 of each year." ????

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First, what does the lease say about returning the security deposit with interest? Even if it's not required by law, if the lease specifies it, you'd have to.

(Not legal advice, but: On the other hand, a lease can't override the law. So, for example, if you'd be required by law to pay, hypothetically, 8% interest, you couldn't put in your lease that you'd only pay 2%.)

There is the Virginia Residential Landlord and Tenant Act. However:
~~~~~~~~~~~~~~~~~~~
The VRLTA covers most residential rental agreements. Several types of properties are
exempt from the Act, including single-family rental houses where the landlord owns and
rents ten or fewer such houses. Landlords and tenants not covered by the VRLTA may
be entitled to different protections and certain protections and benefits discussed in this
handbook may not be available.
~~~~~~~~~~~~~~~~~~~~
So, if you own and rent 10 or fewer houses, it's not applicable to you. See http://www.dhcd.virginia.gov/HomelessnesstoHomeownership/PDF…

If the VRLTA applied to you, here's what it says about interest:
~~~~~~~~~~~~~~~~~~~~
§ 55-248.15:2. Schedule of interest rates on security deposits.
A. The interest rate established by § 55-248.15:1 varies annually with the annual rate
being equal to four percentage points below the Federal Reserve Board discount rate as of
January 1 of each year. The purpose of this section is to set out the interest rates
applicable under this chapter.
B. The rates are as follows:
1. July 1, 1975, through December 31, 1979, 3.0%.
2. January 1, 1980, through December 31, 1981, 4.0%.
3. January 1, 1982, through December 31, 1984, 4.5%.
4. January 1, 1985, through December 31, 1994, 5.0%.
5. January 1, 1995, through December 31, 1995, 4.75%.
6. January 1, 1996, through December 31, 1996, 5.25%.
7. January 1, 1997, through December 31, 1998, 5.0%.
8. January 1, 1999, through June 30, 1999, 4.5%.
21
9. July 1, 1999, through December 31, 1999, 3.5%.
10. January 1, 2000, through December 31, 2000, 4.0%.
11. January 1, 2001, through December 31, 2001, 5.0%.
12. January 1, 2002, through December 31, 2002, 0.25%.
13. January 1, 2003, through December 31, 2003, 0%.
14. January 1, 2004, through December 31, 2004, 1.0%.
15. January 1, 2005, through December 31, 2005, 2.25%.
16. January 1, 2006, through December 31, 2006, 4.25%.
17. January 1, 2007, through December 31, 2007, 5.25%
18. January 1, 2008, through December 31, 2008, 0.75%
19. January 1, 2009 through December 31, 2009, 0.00%.
Thereafter, the interest rate shall be determined in accordance with subsection B of § 55-
248.15:1.
~~~~~~~~~~~~~~~~~~~~~~~~
Again, though, that's if you fell under VRLTA. First thing you should do--as I suggested above--is read the lease and see what you committed to.

Hope that helps.
1 vote Thank Flag Link Thu Feb 25, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Answer (1) is exactly correct. In addition, the security deposit must be returned to the tenant within 45 days, not 30 days as is commonly thought (subject to the terms of that particular lease).
1 vote Thank Flag Link Thu Feb 25, 2010
The published rate for this year is ZERO so you you will not need to pay any interest on a deposit in 2010.
1 vote Thank Flag Link Thu Feb 25, 2010
no-- when you figure it out- it equals to zero
1 vote Thank Flag Link Thu Feb 25, 2010
It depends on the lease, however the published rate is zero for 2010 therefore you would not owe any interest.
Web Reference: http://www.lanemidgett.com
0 votes Thank Flag Link Tue Jun 22, 2010
That is correct. You do have to pay interest based on the annual above-mentioned rate as of Jan.1 of each year, if you do not have a provision that otherwise treats the deposit differently in your lease. This is basically disclosure in regard to the deposit so that the tenant is aware, up front, what to expect of his/her deposit after the lease period is over. The deposit belongs to the tenant, not the landlord. Care should be taken so that it is separate from other monies. If you maintain a separate escrow account at your bank for your tenant's deposit, that will keep you from having a lot of headaches down the road. Just make sure that you mention how interest is calculated on the deposit or if interest will be paid on the deposit in your lease.
0 votes Thank Flag Link Thu Feb 25, 2010
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