Interest Rates on Deposits

As we covered in our series on deposits there is interest on both pet damage deposits and security deposits and it is very easy to figure out how much the interest is using the Residential Tenancy Branch interest calculator on their site. The real question here is how do they figure out the percentage each year?

We have to search in the Residential Tenancy Regulations for this answer. Regulation 4 in part 1 states that the interest paid on deposits is 4.5% below the prime lending rate of the principal banker to the Province on the first day of each calendar year, compounded annually. What does this mean for you? Unless the prime rate exceeds 4.5%, there will continue to be no interest payable on security deposits for tenancies that began after January 1, 2009.


-- Hunter Boucher and Al Kemp

Deposit Interest Rate to Remain at 0%

Interest on security and pet damage deposits is payable at a rate prescribed by section 4 of the Residential Tenancy Regulation. It states that the rate will be set each January 1st for that calendar year, with the rate being "4.5% below the prime rate of the principal banker to the Province." This means that for interest to be payable, the prime rate must be at least 4.6%. We're confident in predicting that the prime rate will be well below 4.6% next month!

The security deposit interest rate has been 0% since 2009, meaning that for any tenancy ending in 2012 that began later than January 1, 2009, there is no interest payable.

Interest rates for earlier years were 1.5% for each of 2007 and 2008, 0.5% for 2006 and 0% for 2002 to 2005 inclusive.

Security and pet damage deposit interest is compounded, so when a tenancy of many years' duration ends, an appreciable amount of interest might be due to the departing renters. You can calculate the amount of interest owing in literally a few seconds by using the Residential Tenancy Branch Deposit Interest Calculator. Go to rto.gov.bc.ca and click on Deposit Interest Rates & Calculator in the column on the left of the page.

-- Al Kemp

No more pet; now what?

You agreed to rent to a couple with a dog and you collected a half month’s rent as a pet damage deposit, as permitted by the Residential Tenancy Act. Yesterday, your renters told you their dog died; they aren’t going to have any more pets, therefore they want their pet damage deposit returned. You can agree to return it, but you are permitted to keep it until the end of the tenancy along with the security deposit. The latter makes sense because it is only when the unit is empty that you will know for sure whether Fluffy did any damage to the carpet or walls.

-- LandlordMentor