I've heard that, as a landlord, I'm required to pay interest on security deposit money I've held in an escrow account for a tenant, and that I may retain a portion of the interest as an administrative fee. Is this all correct? If so, can I place all of my tenants' security deposits in one account? If so, how does one keep track of such accountings? How would I determine how much of an administrative cost is fair? Interest is so minimal, can I just retain all of it as administrative costs? I'm in Pittsburgh, PA.

Thank you,
KEN

It will depend completely on the state you live in ( if in the US) for example in GA and TN where I owned rentals, no, they do not get any of the interest on the security deposit, only the deposit back, in fact I don't have to even keep the money in a separate account.

At the top of this page should be some links to PA rental laws

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Originally Posted by kenitorico

I've heard that, as a landlord, I'm required to pay interest on security deposit money I've held in an escrow account for a tenant, and that I may retain a portion of the interest as an administrative fee. Is this all correct? If so, can I place all of my tenants' security deposits in one account? If so, how does one keep track of such accountings? How would I determine how much of an administrative cost is fair? Interest is so minimal, can I just retain all of it as administrative costs? I'm in Pittsburgh, PA.

Thank you,
KEN

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Here's the law concerning holding security deposits:

"(a) No landlord may require a sum in excess of two months' rent to be deposited in escrow for the payment of damages to the leasehold premises and/or default in rent thereof during the first year of any lease.
(b) During the second and subsequent years of the lease or during any renewal of the original lease the amount require to be deposited may not exceed one month's rent.
(c) If, during the third or subsequent year of a lease, or during any renewal after the expiration of two years of tenancy, the landlord requires the one month's rent escrow provided herein, upon termination of the lease, or on surrender and acceptance of the leasehold premises, the escrow funds together with interest shall be returned to the tenant in accordance with sections 511.2 and 5127.
(d) Whenever a tenant has been in possession of premises for a period of five years or greater, any increase or increases in rent shall not require a concomitant increase in any security deposit.
(e) This section applies only to the rental of residential property.
(f) Any attempted waiver of this section by a tenant by a contract or otherwise shall be void and unenforceable.
8 68 P.S. §250.511e.

Section 250.511b. Interest on escrow funds held more than two years
(a) Except as otherwise provided in this section, all funds over one hundred dollars ($100) deposited with a lessor to secure the execution of a rental agreement on residential property in accordance with section 511.18 and pursuant to any lease newly executed or reexecuted after the effective date of this act shall be deposited in an escrow account of an institution regulated by the Federal Reserve Board, the Federal Home Loan Bank Board, Comptroller of the Currency, or the Pennsylvania Department of Banking. When any funds are deposited in any escrow account, interest-bearing or noninterest-bearing, the lessor shall thereupon notify in writing each of the tenants making any such deposit, giving the name and address of the banking institution in which such deposits are held, and the amount of such deposits.
(b) Whenever any money is required to be deposited in an interest-bearing escrow savings account, in accordance with section 511.1, [Bthen the lessor shall be entitled to receive as administrative expenses, a sum equivalent to one per cent per annum upon the security money so deposited[/B], which shall be in lieu of all other administrative and custodial expenses. The balance of the interest paid shall be the money of the tenant making the deposit and will be paid to said tenant annually upon the anniversary date of the commencement of his lease.
(c) The provisions of this section shall apply only after the second anniversary of the deposit of escrow funds. "