Quick Reference: SF Deposit Interest Rules at a Glance

A San Francisco property manager returns a departing tenant's deposit on day 19, with a clean itemised statement and the AB 2801 photographs attached. Comfortably inside the 21-day window in Civil Code § 1950.5.

The interest payment was already five days late.

Under San Francisco Administrative Code § 49.2(c), a tenant whose security deposit has been held for one year or more "shall be entitled to a direct pro-rata payment of any unpaid accrued interest no later than two weeks after the tenant has vacated the premises."

The interest payment has a two-week deadline. The security deposit itself remains subject to the separate Civil Code § 1950.5 rules, including the 21-day disposition requirement. San Francisco runs a second, shorter clock alongside the state one, and it is the clock most operators do not have in their move-out process.

This article covers Chapter 49: who owes interest, when, how much, and how it is paid. The deposit itself - the one-month cap under AB 12, the 21-day return, itemisation and the AB 2801 photograph requirements - is governed by California Civil Code § 1950.5 and is set out in our guide to California security deposit laws. Chapter 49 sits on top of that framework, not instead of it.

Step 1: Who Owes Interest, and On What

The duty. Under § 49.2(a), "A landlord who is subject to the provisions of Section 1950.5 of the California Civil Code shall pay simple interest on all security deposits held for at least one year for his/her tenants."

Simple interest, not compound.

All security deposits, which under § 49.1 means what § 1950.5 means: any payment, fee, deposit or charge, including one for rent default, repair of damages to the premises caused by the tenant, or cleaning of the premises upon termination. A payment, fee, deposit or charge that falls within the statutory definition of a security deposit can be subject to Chapter 49's interest requirement, regardless of the label used.

Held for at least one year. Rent Board guidance is that where a tenant vacates before one full year of occupancy, no interest is due.

Section 49.2(a) expressly excludes situations where the rent is assisted or subsidized by a government unit, agency or authority.

And coverage is broader than the Rent Ordinance. Rent Board guidance applies Chapter 49's interest requirement to residential rental units in San Francisco, including units exempt from the Rent Ordinance, subject to that exclusion. A newer building outside rent control is still inside Chapter 49.

Because Chapter 49 incorporates the statutory definition of a security deposit, property managers should identify which move-in charges fall within that definition before calculating the applicable interest obligation. The intake and reconciliation discipline in our guide to security deposit accounting is what makes that identifiable per tenancy.

Step 2: The Annual Due Date

Accrual. Under § 49.2(b), interest begins accruing on whatever date the security deposit is received by the landlord, and accrues until the tenancy terminates.

The payment date. Beginning on any date on which the deposit has been held by the landlord for one year, and annually thereafter on the same month and day, the tenant shall be given the unpaid accrued interest.

So the due date is an anniversary of the day you received the money. Not the lease anniversary, not a calendar date, not the rent due date. For a portfolio, that means as many distinct annual due dates as you have tenancies.

And you choose the method. The interest is given "in the form of either a direct payment or a credit against the tenant's rent," and "The landlord shall choose between these two methods of payment." That discretion sits with the landlord, which makes a rent credit a legitimate and often simpler route.

Because each tenancy carries its own anniversary and the payment is annual, this is a recurring obligation that only exists if something surfaces it. Deriving the due date from the date the deposit was received and routing it as a dated annual task through workflow customization, with the resulting credits or payments recorded against the ledger through collecting rent and payments, is what stops years of unpaid interest accumulating quietly.

Step 3: The Rate, and How the Amount Is Calculated

Who sets it. Under § 49.2(f), the rate shall be determined by the Residential Rent Stabilization and Arbitration Board, effective 1 March of each year.

How it is calculated now. Under § 49.2(f)(3), for 1 March 2015 and each year thereafter, the Rent Board calculates the rate according to the annual average of the 90-Day AA Financial Commercial Paper Interest Rate, rounded to the nearest tenth, for the immediately preceding calendar year, as published by the Federal Reserve.

The subsection preserves two earlier methodologies, a Federal Reserve Discount Window Borrowing Rate basis for March 2003 and prior years and a 6-Month Certificate of Deposit basis for March 2004 through March 2014, which matters where historical years are being reconstructed.

The current rate. The Rent Board's published schedule gives 4.2% for 1 March 2026 through 28 February 2027, following 5.0% for the preceding year. The figure changes every March and is published in early January, so confirm the rate applicable to your due date with the Rent Board.

And the calculation, § 49.2(g). The amount due is the amount of the security deposit held by the landlord on the date the interest payment is due, multiplied by either:

• The interest rate in effect on the date the annual payment is due, where the payment is the annual one under § 49.2(b); or

• The interest rate in effect on the date the tenant vacates the unit, where the tenant is entitled to a pro-rata payment under § 49.2(c).

The ordinance therefore uses the rate applicable on the relevant payment date, with different rules for annual and pro-rata payments.

For a long tenancy in which required annual interest payments were not made, the calculation may require reconstructing the unpaid annual payments using the applicable deposit balance and the rate prescribed for each relevant payment date. The ordinance's calculation rule distinguishes between annual payments and the final pro-rata payment. The arithmetic is straightforward; the record-keeping is not, which is why paying annually is far easier than reconstructing later.

Step 4: The Two-Week Termination Payment

Under § 49.2(c), on termination of tenancy, a tenant whose security deposit has been held for one year or more shall be entitled to a direct pro-rata payment of any unpaid accrued interest no later than two weeks after the tenant has vacated the premises.

Three features.

It is a direct payment. The § 49.2(b) option of a rent credit is not available here; there is no rent left to credit.

The ordinance measures the two-week period from when the tenant has vacated the premises, not from the termination date or the end of the notice period.

And it is shorter than the 21 days allowed under § 1950.5 for the deposit and itemised statement. A single move-out therefore carries two deadlines, and the earlier one belongs to the interest.

Retention is possible but constrained. Section 49.2(c) permits retention of unpaid accrued interest where the security deposit alone is insufficient to cover the specified tenant obligations - rent default, repair of damages caused by the tenant exclusive of ordinary wear and tear, or cleaning on termination - but only subject to the limitations and requirements of California Civil Code § 1950.5(e).

Because the interest deadline is earlier than the deposit deadline and runs from a different event, the move-out process needs both dates recorded from the day the tenant vacates. Capturing the vacating date alongside the deposit receipt date, as a move-in and move-out workflow does, is what makes the two-week payment land on time.

Step 5: Two Provisions That Favour Landlords

Chapter 49 is a tenant-protective ordinance, but two subsections run the other way.

Investing the deposit. Under § 49.2(d), "Nothing in this Chapter shall preclude a landlord from exercising his or her discretion in investing security deposits."

San Francisco does not require the deposit to be held in a segregated or escrow account, and neither does § 1950.5. What Chapter 49 requires is that a defined rate of interest be paid to the tenant; § 49.2(d) does not prohibit a landlord from exercising discretion in investing the deposit in the meantime.

The Rent Board fee offset. Under § 49.2(e), where a landlord seeks reimbursement for the annual Residential Rent Stabilization and Arbitration fee under § 37A.6, the landlord may deduct that fee from the next interest payment owed under Chapter 49.

Section 37A.6 sets the limits. An owner who has paid the fee in full may seek recovery of the fee, exclusive of any penalties added under § 37A.4, from the tenants in occupancy of each residential unit on 1 November, up to a maximum of 50% of the annual fee for each unit. Rent Board guidance describes the mechanism as recovering 50% of the Rent Board fee by deducting it from the security deposit interest payment due each year.

Two further mechanics. Where no interest or insufficient interest exists, because there is no deposit or the deposit is small, the owner may bill the tenant for any balance. And a banked fee may only be collected as a deduction against security deposit interest due the tenant.

So the offset is real but bounded: half the annual fee, from tenants in occupancy on 1 November, exclusive of penalties, with billing available only where interest is absent or insufficient. Confirm the current fee amount and the applicable procedures with the Rent Board before applying it.

Step 6: Remedies and the Waiver Bar

Remedies, § 49.3. "The rights, obligations and remedies of tenants and landlords under this Chapter shall be as provided in Subsections (f), (g), (h) and (j) of Section 1950.5 of the California Civil Code."

Chapter 49 does not create its own penalty scheme. It borrows the state framework, including the § 1950.5 provisions on the itemised statement, the return obligation, bad faith retention and the associated statutory damages, which are set out in the California guide linked above.

Waiver, § 49.4. "Any waiver by a tenant of rights under this Chapter shall be void as contrary to public policy." A lease provision that purports to waive a tenant's rights under Chapter 49 is void under § 49.4.

And § 49.5 provides severability, so an invalid provision does not take the rest of the Chapter with it.

Because a Chapter 49 dispute is resolved through the § 1950.5 framework, the evidence needed is the same evidence the deposit process already requires: what was received, when, what rate applied, and what was paid or credited. Holding that alongside the tenancy record, as a Tenant 360 View approach supports, is what makes an interest position defensible years later.

Step 7: What This Article Does Not Cover

The deposit itself. The one-month cap under AB 12, the 21-day return, the itemised statement, the AB 2801 photograph requirements and bad-faith damages all sit in Civil Code § 1950.5 and are covered in our California security deposit guide.

Section 1950.5(e) in full, which limits what may be retained and which § 49.2(c) incorporates.

Chapter 37A in full, including which units are exempt from the Rent Board fee and the billing and banking procedures.

The Rent Ordinance itself. Administrative Code Chapter 37 governs rent increases, just cause for eviction and buyout agreements, and is a separate subject.

And other cities. Berkeley, Santa Cruz County, Capitola, West Hollywood and Los Angeles operate their own deposit interest rules with different rates, due dates and payment intervals. Confirm which city's rule applies before calculating anything.

Common San Francisco Deposit Interest Mistakes

1. Treating the 21-day deposit deadline as the only clock
Section 49.2(c) requires the pro-rata interest payment no later than two weeks after the tenant has vacated.

2. Measuring the two weeks from termination
The ordinance measures it from when the tenant has vacated the premises.

3. Missing the annual payment entirely
It is due once the deposit has been held one year, and annually thereafter on the same month and day.

4. Using the lease anniversary as the due date
The anniversary is of the date the deposit was received.

5. Assuming a non-rent-controlled building is exempt
Rent Board guidance applies the requirement to units exempt from the Rent Ordinance, subject to the government-assisted exclusion.

6. Treating a move-in fee, pet deposit or cleaning fee as outside Chapter 49
Section 49.1 adopts the § 1950.5 definition, which reaches any payment, fee, deposit or charge serving those functions.

7. Using last year's rate
The rate changes each 1 March; it is 4.2% for 1 March 2026 to 28 February 2027.

8. Using the wrong rate date
Annual payments use the rate on the due date; pro-rata payments use the rate on the date the tenant vacates.

9. Compounding
Section 49.2(a) requires simple interest.

10. Netting interest against any claim
Retention under § 49.2(c) applies where the deposit alone is insufficient, and only subject to § 1950.5(e).

11. Deducting the whole Rent Board fee
Section 37A.6 permits recovery of up to 50% of the annual fee, exclusive of penalties, from tenants in occupancy on 1 November.

12. Billing the fee where interest is available
Billing is for where no interest or insufficient interest exists; a banked fee may only be collected as a deduction against interest.

13. Assuming the deposit must sit in an escrow account
Section 49.2(d) does not prohibit a landlord from exercising discretion in investing security deposits.

14. Relying on a lease waiver
A provision purporting to waive Chapter 49 rights is void under § 49.4.

15. Paying interest on a subsidised tenancy
Section 49.2(a) excludes rent assisted or subsidized by a government unit, agency or authority.

Conclusion

San Francisco adds a layer to California deposit law that has nothing to do with the deposit itself.

• Chapter 49 requires simple interest on all security deposits held at least one year, on any charge falling within the statutory definition, across residential units in the City including those exempt from the Rent Ordinance, with an exclusion for government-assisted or subsidized rent.

• The due date is an anniversary of receipt, paid annually as either a direct payment or a rent credit, at the landlord's choice, at a rate the Rent Board sets each 1 March and which is currently 4.2%.

• And termination runs a shorter clock than the state deposit rule. A direct pro-rata payment is due no later than two weeks after the tenant has vacated, alongside the separate 21-day § 1950.5 requirement for the deposit.

• Two subsections favour the landlord. Section 49.2(d) does not prohibit exercising discretion in investing deposits, and § 49.2(e) with § 37A.6 permits recovering up to 50% of the annual Rent Board fee from tenants in occupancy on 1 November by deducting it from the next interest payment.

For teams managing San Francisco portfolios, the compliance is arithmetic and calendar work rather than judgement. Record the date each deposit was received, derive the annual due date from it, apply the rate the Rent Board published for that period, and put a two-week interest deadline into every move-out alongside the 21-day one.

Official Resources

• SF Administrative Code Chapter 49, Interest on Security Deposits

• San Francisco Rent Board, Topic No. 013: The Rent Board Fee

• San Francisco Rent Board, Security Deposits

• SF.gov, Security Deposits information

This article is for informational purposes only and does not constitute legal advice. San Francisco security deposit interest requirements sit in Chapter 49 of the San Francisco Administrative Code; the deposit itself is governed by California Civil Code § 1950.5, which Chapter 49 incorporates for definitions and remedies. The interest rate is set by the Rent Board and changes each 1 March, so confirm the rate applicable to your due date directly with the Rent Board, along with the current Rent Board fee amount under Chapter 37A. Requirements can change through amendments to the Administrative Code, updated Rent Board guidance and changes in state law. This article addresses the City and County of San Francisco only; other California cities operate different deposit interest rules. For advice on a specific tenancy, consult a licensed California attorney.

Frequently Asked Questions

Q1. Do San Francisco landlords have to pay interest on security deposits?
Yes. Under § 49.2(a), a landlord subject to Civil Code § 1950.5 must pay simple interest on all security deposits held for at least one year, unless the rent is assisted or subsidized by a government unit, agency or authority.

Q2. When is the interest due?
Once the deposit has been held one year, and annually thereafter on the same month and day the deposit was received, under § 49.2(b).

Q3. Can it be paid as a rent credit?
Yes. Section 49.2(b) allows either a direct payment or a credit against rent, and provides that the landlord shall choose between the two methods.

Q4. What happens when the tenant moves out?
Under § 49.2(c), a tenant whose deposit has been held one year or more is entitled to a direct pro-rata payment of unpaid accrued interest no later than two weeks after vacating. The deposit itself remains subject to the separate 21-day rule in § 1950.5.

Q5. What is the current rate?
4.2% for 1 March 2026 through 28 February 2027, following 5.0% the prior year. The rate changes each 1 March and is published in early January.

Q6. Does Chapter 49 apply to buildings outside rent control?
Rent Board guidance applies the requirement to residential rental units in San Francisco including those exempt from the Rent Ordinance, subject to the government-assisted or subsidized rent exclusion.

Q7. Can the Rent Board fee be deducted from the interest?
Yes, within limits. Section 49.2(e) permits the deduction, and § 37A.6 allows recovery of up to 50% of the annual fee, exclusive of penalties, from tenants in occupancy on 1 November. Where no or insufficient interest exists, the owner may bill the tenant for the balance.

Q8. Can a lease waive the interest requirement?
No. Under § 49.4, any waiver by a tenant of rights under Chapter 49 is void as contrary to public policy.