HB 723 was passed and signed into law by the Governor. The legislation lowers the state mandated interest rate on tenant security deposits from 4% to 3%. The Maryland Attorney General's office was asked to determine how the law applies to existing leases terminating after the October 1, 2004 effective date. The Attorney General's office offered the following opinion:

1. For leases that state the interest rate as “4%,” the landlord is subject to that rate for the length of the lease term regardless of whether the term expires before or after the October 1, 2004 effective date. Of course, after the effective date, the landlord could draft a new lease with the 3% interest rate.

2. For leases that state an interest rate that is consistent with Maryland law but that does not cite an actual rate, the interest would have to be computed in six-month intervals from the time the lease was entered into. If the 6-month accrual period ends before the effective date (October 1, 2004), a 4% interest rate would be computed. If the 6-month accrual period ends after the effective date (October 1, 2004), a 3% interest rate would be computed.

For more info, contact Bill Castelli at 800.638.6425 or at bill.castelli@mdrealtor.org.