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Regulatory • October 24, 2007

Rent Board Admits Interest Rates Were Wrong For Years

Rent Board Admits Interest Rates Were Wrong For Years

 

Error Cost Landlords Hundreds of Thousands of Dollars

 

For many landlords, the single most irritating annual event comes when you must write a check, to each of your tenants, for the interest you have theoretically earned “investing” their security deposit.  It’s not so much the fact that you have to pay interest you didn’t actually earn; no, what is most galling is just how high that interest rate seems to be!  Five and a half percent?  And it always comes at the exact same time the Board tells you that you, the landlord, are entitled to a whopping seven-tenths of one percent annual rent increase!

 

Well, last month BPOA lodged a formal protest with the Rent Board regarding the interest rate the Board was setting for security deposits.  As reported in these pages last month, BPOA’s basic position was that the Rent Board had made a colossal mistake implementing Proposition P, the law that mandates interest payments in the first place.  Put simply, the Rent Board had chosen the wrong interest rate from among those published by the Fed, with the effect that landlords were being required to pay a rate normally reserved for major financial institutions trading hundreds of thousands of dollars worth of secondary-market certificates of deposit!

 

A few weeks later, something completely unexpected happened:  the Rent Board – or at least its legal staff – admitted that BPOA was right.  The Board had been calculating the interest rate incorrectly.  And not by a small amount:  the Board-mandated interest rate was approximately twice what it should have been.

 

What happens next?  The Board must decide how to fashion a remedy.  Of course, BPOA will be making some suggestions.  (You can email your own to bpoa@bpoa.org.) Unfortunately, things are not starting off on the right foot:  the rent board’s website continues to advertise the wrong interest rate.  Apparently it’s harder than we thought for the Rent Board to do the right thing.

 

 

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