Maryland Department of Housing and
Community Development

Background & Methodology

Background

Chapters 488 and 489 (Senate Bill 345/House Bill 249) of the 2014 Laws of Maryland altered the amount of interest a landlord or mobile home park owner must pay on a security deposit – from the previous 3% per annum that was mandated since 2004 – to the new U.S. Treasury yield curve rate calculation.

In 2015, Senate Bill 408/House Bill 782 updated this law as follows:

  • The start date for the calculation of interest on security deposits should be the date that the security deposit was given to the landlord;
  • Interest is to accrue monthly (instead of every 6 months), except in cases where the security deposit has been held for less than 6 months;
  • Interest is only to accrue on full months.

In creating this calculator, the Maryland Department of Housing and Community Development made the following determinations in the interpretation of the revised Real Property Article §8-203 to create the logic and formulas necessary to provide these calculations:

  • Calculations are based on a start date defined as the date that the security deposit is given to the landlord, and an end date defined as the tenancy end date;
  • For the purposes of the calculation, all years have 365 days. For leap years (which have 366 days), the error represents less than $0.05 on a security deposit of $1,000 at an interest rate of 1.5%, and less than $0.10 on a security deposit of $1,000 at an interest rate of 3.0%.
  • The interest rate used to calculate each monthly payment is the interest rate in place on the first day of that period. Should a monthly payment period encompass two calendar years, the interest rate for the first of those calendar years will be applied to that payment period; and
  • Noting that the daily 1-year U.S. Treasury yield curve interest rate as of the first business day of a calendar year will only be available on January 2, 3 or 4, (depending on which day of the week January 1st falls on), any lease which begins on or after January 1 and before the first business day of the year will have the interest rate for that calendar year applied at the end of the relevant monthly period.

Daily Treasury Yield Curve Rates are available through the U.S. Department of Treasury.

Methodology

For a given monthly payment period, the interest rate used in the calculation is either the U.S. Treasury Yield Curve Rate from the first business day of the calendar year of the start of the payment period, OR 1.5%, whichever is higher.

For example, if a payment is being calculated on March 18, 2017, the interest rate payable will be the U.S. Treasury Yield Curve Rate for January 4, 2016 (the first business day of 2016) or 1.5%, whichever is higher. This interest rate will be applied to the amount of the security deposit, and multiplied by 0.083 (to account for this payment reflecting 1/12th of a year). This amount will be set aside for final payment. Each monthly payment will be calculated using the relevant interest for that period, a 0.083 multiplier and the original amount of the security deposit. No interest is payable on a partial month at the end of a lease/tenancy.

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