Leasing License Practice Exam

What is the threshold number of units that requires a landlord to pay interest on the security deposit?

1. 10 units

2. 25 units

3. 50 units

4. 100 units

The correct answer is: 25 units

In many jurisdictions, the requirement for a landlord to pay interest on security deposits is triggered when a landlord manages a certain number of rental units. In this case, the threshold is set at 25 units. This regulation exists to ensure that landlords are held accountable for the handling of tenants' deposits, particularly in larger rental operations where the volume of deposits is significant. The rationale behind this requirement is to protect tenants' financial interests. When a landlord manages 25 or more rental units, it's likely that they have a robust business structure, and thus the obligation to pay interest becomes more pertinent. This is also a measure to promote fairness and transparency in property management, ensuring tenants receive a return on their deposits, which may be held for extended periods. Lesser numbers, such as 10 or 50 units, do not meet the established threshold for this interest obligation, while an even higher number like 100 units far exceeds the common regulatory threshold, making it less practical as a standard requirement.