Feature

New Law Changes the Rate and Methodology for Interest Due on Deposits

by Joe Grubb

At the request of some landlords, Supervisor Aaron Peskin proposed an amendment to the law (Chapter 49 of the Administrative Code) governing the methodology for calculating interest payments on deposits held by landlords. The approved amendment, effective August 4, 2002, altered this method and gave responsibility to the Rent Board for the annual calculation.

The ordinance now authorizes the Rent Board to calculate this amount each year (Section 37.6 of the Rent Ordinance). Herein, the interest rate paid will constitute the average of the 12 monthly “Discount Window” rates ending December 31 as posted by the Federal Reserve Bank. The rate will be calculated and announced annually by the Rent Board during the first week of January and will be in effect from March through February of each year.

The rate for this year (2002-03), 3.4 percent, will be in effect as of August 4, 2002 through February 28, 2003. For those doing calculations that span both rate periods, the amount paid must include both a calculation for those months with a 5 percent rate (any date prior to August 4, 2002) and a calculation at the 3.4 percent rate (from the effective date of this ordinance, August 4, 2002, through February 28, 2003). The new rate is not retroactive to this past March or any time prior to the effective date of this ordinance.

Each new rate will be available on our automated information system, Menu No. 11, as soon as it is known during the first week of January. You can also find it on the 24-hour number, 415.252.4600, on our fax back service at 415.252.4660, Menu No. 111, and on Fact Sheet No. 3. See this fact sheet for more information on interest payments.

One problem not addressed in the legislation was the fact that owners are now required to do two calculations in most cases, since there are very few anniversaries that will coincide exactly with the calculation periods for interest rate determinations. We know some folks found it quite difficult to calculate just one rate per year, so this new procedure will probably prove overwhelming for them.

We hope to motivate the Supervisors to amend the law so that whenever the anniversary date for payment of the interest occurs, the owner need only calculate the rate in effect at that time for the applicable 12-month period without having to do two calculations. Stay tuned.

The Rent Board Fee— New Rates for 2003
Chapter 37A of the Administrative Code allows the city to collect a per-unit fee for each residential dwelling unit subject to the Rent Ordinance. This fee defrays the operation of the Rent Board entirely, for the Rent Board does not receive property tax funding. This fee, billed to the landlord each year, permits landlords to collect a portion of Rent Board fee from the tenant(s) in occupancy as of November 1 of each year.

The fee as of November 2002 is $27 per apartment/home/condominium unit and $13.50 per residential hotel unit that is subject to the Ordinance. However, only $21.50 and $2.75 of the fee may be passed through to the tenants in apartments and hotels, respectively. The landlords of apartments and hotels will be responsible for $5.50 and $2.75, for each unit. Landlords may bill for this amount as of November 1 of each year. Chapter 37A also mandates the following:

The fee must be deducted from the interest due the tenant on the deposit held unless the landlord has paid the interest payment annually to the tenant. In these instances, the owner can bill separately for the fee as long as the interest is paid annually to the tenant. If there is no deposit held, the owner can bill directly for the fee.
A landlord may now “bank” the fee and collect it in later years. This means that he or she does not have to collect the fee in the year that it is due, but is entitled to “bank” or collect the Rent Board fee in later years if desired. This change only applies to fees imposed from November 1999 on. Landlords who failed to collect the Rent Board fee for years prior to 1999 will not be able to collect those fees under this provision.
Request for payment of the fee shall include: (1) written explanation that itemizes the fee amount due each year for which payment is sought; and, (2) itemization of interest due for each year not paid.

A tenant’s failure to pay the Rent Board fee as demanded is not a just cause for eviction. The landlord will have to go to Small Claims Court in order to recover.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. Joe Grubb is Executive Director of the San Francisco Rent Board. You can reach the Rent Board at 415-252-4601. © Copyright 2002.