State Passes Landlord-Friendly Security Deposit Law

Landlords in Connecticut will no longer have to pay a guaranteed minimum interest rate on tenant security deposits.

A bill just passed into law eliminates the requirement that a landlord pay a minimum 1.5% interest rate on residential security deposits, which is higher than interest currently offered by banks.

Current law requires a landlord to pay at least the average savings deposit interest rate paid by insured commercial banks published in the Federal Reserve Board Bulletin in November of the prior year (i.e., deposit index), but not less than 1.5%. The 2010 deposit index rate is 0.28%.

The new bill retains the deposit index method for calculating the security deposit interest rate.The bill also allows a tenant to provide his or her forwarding address to a landlord by email. Current law only allows a tenant to do so in writing. By law, a landlord must return to a tenant’s forwarding address a tenant’s security deposit with interest or give a tenant written notice of damages claimed within 30 days after the tenant moves out. If a tenant fails to provide a written forwarding address, the landlord is not required to return the security deposit or provide a written notice of damages until 15 days after written receipt of a forwarding address or 30 days after the tenant moves out, whichever is later.

The new law becomes effective beginning in January, 2012.

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