Leasing License Practice Exam

When can interest on a security deposit be collected by the landlord?

1. Immediately upon receiving the deposit

2. After 1 month of holding the deposit

3. After holding the deposit for more than 6 months

4. Never; it is not collectible

The correct answer is: After holding the deposit for more than 6 months

The option indicating that interest on a security deposit can be collected by the landlord after holding the deposit for more than 6 months is correct because it reflects legal regulations in many jurisdictions that stipulate a timeframe for when interest can accrue. Landlords are often required by law to hold security deposits in interest-bearing accounts, which allows them to collect interest on the deposited funds. The rationale behind setting this timeframe, such as 6 months, is to ensure that the landlord has sufficient time to invest the deposit in a way that generates interest, while also protecting tenants by ensuring that they do not lose out on potential earnings from their deposit. It also balances the interests of both tenants and landlords regarding the management of funds. In contrast to this correct answer, options that suggest immediate collection of interest or collection after just one month do not reflect the typical legal practices. Often, the interest is not immediately available and requires a longer holding period to generate meaningful returns. The option stating that interest is never collectible contradicts the common legal framework that allows landlords to obtain interest on security deposits, provided they fulfill certain requirements.