Supervisor Peskin's Change in Interest Ordinance Amendment Passes First Reading June 20, 2002

Supervisor Peskin's Change in Interest Ordinance Amendment Passes First Reading June 20, 2002
 

On Monday June 17, 2002, the Board of Supervisors approved Supervisor Peskin"s legislation below that changes how interest due on deposits is calculated. Currently the law requires 5% simple interest to be paid on any deposits held by an owner. The new law, which will go into effect 30 days after the Mayor signs it (probably in the first week of August-we will post that information as soon as the signature date is known), will base the rate of interest to be paid on the Federal Reserve"s Discount rate. The rate for this year, 3.4%, will be in effect from the effective date as noted above through February 28, 2003. It will be re-calculated each year around the first week of January by the Rent Board and announced shortly thereafter to be effective as of March 1st of each year for the following 12 months.

 

For those doing calculations that will span both rate periods, the amount paid will have to include a calculation for those months while the rate was 5% and a calculation at 3.4% from the effective date of this ordinance through February 28th, 2003. The new rate is NOT retroactive to this past March nor any time prior to the effective date of this ordinance.

 

The effective date will be available on our automated information system, Menu No. 11 when it is known. That 24-hour number is 415.252.4600. It is also available on our fax back service at 415.252.4660, Menu No. 111. Fact Sheet No. 3 will also provide this information each year.

 

THE TEXT OF THE LEGISLATION IS AS FOLLOWS:

[Changing landlords annual interest payments on residential tenant security deposits, to be calculated and paid according to a one-year Treasury Bill rate the Federal Reserve Discount Rate instead of continuing to be paid at the current five percent (5%) rate, with the rate to be determined annually by the Residential Rent Stabilization and Arbitration Board from posted Federal Reserve data.]

Ordinance providing that annual landlord interest payments on residential tenant security deposits shall be paid at an interest rate determined annually by the Residential Rent Stabilization and Arbitration Board from the posted Federal Reserve one-year Treasury Bill Discount rates, instead of continuing to be paid at a five percent (5%) simple interest rate as provided by the current ordinance, and clarifying that interest accrues until termination of the tenancy.

 
 

Note: Additions are single-underline italics Times New Roman font;
deletions are 
strikethrough italics Times New Roman font.

Board amendment additions are double underlined Arial font;

Board amendment deletions are strikethrough normal Arial font.

 

Be it ordained by the People of the City and County of San Francisco:

 

Section 1. The San Francisco Administrative Code is hereby amended by amending Section 49.2, to read as follows:

Sec. 49.2. PAYMENT OF INTEREST ON SECURITY DEPOSITS.

(a) A landlord who is subject to the provisions of Section 1950.5 of the California Civil Code shall pay at least five percent simple interest per year on all security deposits held for at least one year for his/her tenants; provided, however, that this requirement shall not apply where the rent is assisted or subsidized by any government unit, agency or authority.

(b) Interest shall begin accruing on September 1, 1983, or on whatever date the security deposit is received by the landlord after September 1, 1983, and shall accrue until the tenancy terminates. Beginning on September 1, 1984, or on any date thereafter upon which the security deposit has been held by the landlord for one year, a tenant shall be given the unpaid accrued interest in the form of either a direct payment or a credit against the tenant"s rent. The landlord shall choose between these two methods of payment.

(c) The landlord may elect to pay the accrued interest as provided in Subsection (b) above on a monthly basis, but in no event less than once a year.

(d) Upon 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; provided, however, that a landlord may retain any portion of the unpaid accrued interest, subject to the limitations and requirements set forth in Section 1950.5 (e) of the California Civil Code, where the security deposit alone is insufficient to remedy tenant default in the payment of rent, to repair damages to the premises caused by the tenant, exclusive of ordinary wear and tear, or to clean such premises, if necessary, upon termination of the tenancy.

(e) Nothing in this Chapter shall preclude a landlord from exercising his or her discretion in investing security deposits.

(f) Notwithstanding the provisions of (a) through (d) above, where a landlord seeks reimbursement for the annual Residential Rent Stabilization and Arbitration fee as provided in Sec. 37A.6 of this Code, the landlord may deduct said fee from the next interest payment owed to the tenant pursuant to this Chapter.

(g) The interest rate for interest payments required by this Chapter 49 shall be as follows:

(1) For time periods prior to [the effective date of this Subsection 49.2(g)] the interest rate is 5%. However, in no event shall the total interest a landlord is obligated to pay for these time periods exceed the total amount of interest due if the interest is alternatively calculated under the rates established by Subsection 49.2(g)(2). Thus, the total interest owed from the commencement of the tenancy to [the effective date of this Subsection 49.2(g)] is the lesser of: (A) interest calculated at 5%; or, (B) interest calculated pursuant to Subsection 49.2(g)(2).

(2) Except for the 5% interest rate provided in Subsection 49.2(g)(1), the interest rate shall be determined by the Residential Rent Stabilization and Arbitration Board (Rent Board), to be effective on March 1 of each year. The Rent Board shall set calculate the rate shall be calculated by as of the immediately preceding December 31st according to the Federal Reserve Discount Rate as of December 15th 31st of each the preceding calendar year, using an average of the twelve most recent monthly rates (rounded to the nearest tenth) as posted by the Federal Reserve on the Federal Reserve Statistical Release internet site for one-year constant maturity Treasury Bills. The Rent Board shall promulgate rules and regulations as needed to effectuate this rate setting responsibility.

 
 

Section 2. The San Francisco Administrative Code is hereby amended by amending Section 37.6, to read as follows:

Sec. 37.6. POWERS AND DUTIES.

In addition to other powers and duties set forth in this Chapter, and in addition to powers under the Charter and powers and duties under Administrative Code Chapter 49 ("Interest Rates on Security Deposits), the Board shall have the power to:

(a) Promulgate policies, rules and regulations to effectuate the purposes of this Chapter;

(b) Hire such staff, including Administrative Law Judges, as may be reasonably necessary to perform its functions, and promulgate standards for all such staff, subject to the Civil Service provisions of the Charter;

(c) Conduct rental arbitration hearings and administer oaths and affirmations in connection with such hearings;

(d) Publish, on March 1st of each year, the increase in the CPI for the preceding 12 months, as made available by the U.S. Department of Labor;

(e) Make studies and surveys and conduct such hearings as necessary to perform its functions;

(f) Report biannually to the Mayor and the Board of Supervisors on its activities and on progress made towards the achievement of the purposes of the Chapter;

(g) Make available to the public, on request, policies, rules and regulations, reports and surveys in accordance with applicable State law;

(h) Issue rules and regulations for the conduct of its own affairs;

(i) Be empowered to request and, if granted, to receive funds appropriated by the Board of Supervisors through the mayor;

(j) Maintain, on at least a monthly basis, statistics on the number of notices to vacate filed with the Board pursuant to Section 37.9(c) and statistics on the causes given in such notices or in any additional written documents as provided in Section 37.9(c). Said statistics shall be published in a report on March 1st every year, and copies of the report shall be submitted to the Mayor and Board of Supervisors;

(k) Compile a list at random, on a monthly basis, of 10 percent of the notices to vacate filed pursuant to Section 37.9(c) which state on the notice or in any additional written document any causes under Section 37.9(a)(8) as the reason for eviction. Said list shall be transmitted to the District Attorney on a monthly basis for investigation pursuant to Section 37.9(c).

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APPROVED AS TO FORM:

DENNIS J. HERRERA, City Attorney

 
 

By:

Marie Corlett Blits

Deputy City Attorney