Does California require deposit interest?

No statewide requirement. Civil Code §1950.5 governs deposits but doesn't mandate interest. Several cities impose interest by local ordinance — particularly cities with active rent boards.

Which cities require deposit interest?

Berkeley, Santa Monica, West Hollywood, San Francisco, Los Angeles (RSO units), East Palo Alto, Hayward, and Watsonville among others have annual deposit-interest requirements. Rate is typically published annually by the local rent board. Confirm current rate with the relevant rent board before each annual cycle.

How is interest paid?

Two methods: annual cash payment to tenant on each anniversary, or annual credit against rent. Local ordinance specifies. Failure to pay can produce statutory penalties at the city level.

What about the AB 414 electronic-return change?

AB 414 (effective Jan 1 2026) allows electronic return of the deposit balance at move-out if both sides agree. Doesn't change interest obligations during tenancy — that's still governed by local ordinance where applicable.

What about AB 12 deposit caps?

Statewide deposit cap of one month's rent for most rentals (AB 12, effective Jul 1 2024). Small-landlord exemption for 2-unit owners residing on premises. Doesn't affect interest rules but caps the principal.

No state default · Local-ordinance driven

Deposit interest in California. City rule, not state.

No state requirement. Several rent-board cities require annual interest at locally published rates. Check the rent board annually. The AB 12 deposit cap and AB 414 electronic-return rule changed the principal handling but not the interest framework.

TL;DR

State: no interest required. Local rent-board cities (Berkeley, SM, WH, SF, LA RSO, etc.): annual interest at locally set rate, payable as cash or rent credit. Check current rate annually. AB 12 caps principal; AB 414 allows electronic return.

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Common questions — deposit interest

State requirement?

No.

Which cities?

Berkeley, SM, WH, SF, LA RSO, others.

How paid?

Cash annually or rent credit.

AB 414 effect?

Electronic balance return; doesn't change interest rules.

AB 12 cap?

1 month statewide, small-landlord exemption.