Do El Segundo and Manhattan Beach Landlords Owe Interest on Security Deposits? No.

Published August 10, 2026

Landlords in El Segundo, Manhattan Beach, Hermosa Beach, Redondo Beach, Torrance and Hawthorne owe zero interest on tenant security deposits. Only City of Los Angeles RSO units carry that obligation, at 3.03% for 2026.

Last verified: August 10, 2026

If your rental is in El Segundo, Manhattan Beach, Hermosa Beach, Redondo Beach, Torrance or Hawthorne, you owe your tenant $0 in security deposit interest. No California statute requires it, and none of those cities has a rent stabilization ordinance that adds one. Only the City of Los Angeles does, at 3.03% for 2026.

Why the answer is $0 in most South Bay cities

California Civil Code § 1950.5 is the statewide security deposit law. It governs what a deposit can be used for, the 21 day return deadline, and the itemized statement. It says nothing about interest. There is no state requirement to pay it, and no state requirement to hold the money in an interest bearing account at all.

Interest obligations come from local rent control ordinances instead. Los Angeles County's Department of Consumer and Business Affairs says the same thing plainly: state law does not require interest on deposits, though some local rent control laws do.

So the question for a South Bay owner is narrow. Does my city have a rent stabilization ordinance, and does that ordinance require deposit interest?

For El Segundo, Manhattan Beach, Hermosa Beach, Redondo Beach, Torrance and Hawthorne, the answer to the first question is no. None of them appears on the California Department of Real Estate's list of jurisdictions with rent control ordinances, which does name Los Angeles, Inglewood, Culver City, Gardena, Beverly Hills, Santa Monica, West Hollywood and unincorporated Los Angeles County. No local ordinance means no local interest requirement. You owe nothing.

The contrast: City of Los Angeles RSO units

Los Angeles Municipal Code § 151.06.02 requires landlords of units covered by the Rent Stabilization Ordinance to pay annual interest on any security deposit held for at least one year. The rate is set each year by the Rent Adjustment Commission.

For 2026 the rate is 3.03%. That is down from 4.32% in 2025, which itself followed years near zero (0.52% in 2024, 0.04% in 2023). Source: Los Angeles Housing Department Rent Stabilization Bulletin #44, issued January 13, 2026.

Which units are covered

Per the same bulletin, the requirement reaches rental units subject to the RSO inside the City of Los Angeles with a certificate of occupancy first issued before October 1, 1978. That includes dwelling units, suites, condominiums, duplexes, guest rooms, and rooms in a hotel, motel, rooming house or boarding house occupied by the same tenant for more than 30 consecutive days. Mobile home parks are excluded.

How it gets paid

A covered landlord has two options. Use the Rent Adjustment Commission's simple interest rate, or pay the actual interest the deposit earned and hand the tenant a bank statement showing it. If the deposit is not in an interest bearing account, the Commission's rate applies by default.

Payment can be a direct payment or a credit against rent, monthly or yearly, and you must tell the tenant in writing which method you chose. At move out, accrued interest goes back on the same schedule as the deposit itself under Civil Code § 1950.5(h).

Where South Bay owners get caught

Several neighborhoods people think of as South Bay sit inside Los Angeles city limits. Westchester, Playa del Rey, Harbor City, Wilmington and San Pedro are City of Los Angeles, not independent cities. A pre 1978 fourplex in San Pedro can be RSO covered and owe 3.03% for 2026. A fourplex six miles away in Torrance owes nothing. The line that matters is the city boundary and the certificate of occupancy date.

One more detail worth knowing. The Rent Stabilization Division does not investigate complaints about unpaid deposit interest. LAMC § 151.06.02(G) gives the tenant a civil remedy, so these land in small claims court. That does not make the obligation optional. It means the first you hear of it may be a filing.

The adjacent rule: AB 12 capped your deposit

AB 12 (2023) amended Civil Code § 1950.5 effective July 1, 2024. Most California landlords may collect no more than one month's rent as a security deposit, furnished or unfurnished. The old two month and three month tiers are gone.

There is a narrow exception. A landlord who is a natural person, or an LLC whose members are all natural persons, and who owns no more than two residential rental properties totaling no more than four dwelling units, may still collect up to two months' rent. That exception does not apply if the prospective tenant is a service member, who keeps the one month protection regardless. Own a single El Segundo duplex in your own name and you likely still qualify. Hold it in a corporation, or own a third rental, and you do not.

What to actually do

• Confirm the city your unit is in, not the neighborhood name. If it is City of Los Angeles, check the certificate of occupancy date.
• Outside City of LA in the South Bay, do not pay deposit interest and do not promise it in your lease. A lease clause promising interest is enforceable against you even where no law requires it.
• Check the deposit against the AB 12 cap at every new tenancy, and return it with an itemized statement within 21 days of move out under Civil Code § 1950.5(h)(1).

FAQ

Do Manhattan Beach landlords have to pay interest on a security deposit?

No. Manhattan Beach has no rent stabilization ordinance, and California Civil Code § 1950.5 imposes no interest requirement. The obligation exists only where a local ordinance creates it, as Los Angeles Municipal Code § 151.06.02 does inside the City of Los Angeles.

What is the Los Angeles security deposit interest rate for 2026?

3.03%, set by the Rent Adjustment Commission and published in LAHD Rent Stabilization Bulletin #44 on January 13, 2026. It applies to RSO covered units in the City of Los Angeles where the deposit has been held at least one year. The 2025 rate was 4.32%.

How much security deposit can a California landlord collect in 2026?

One month's rent for most landlords, under Civil Code § 1950.5 as amended by AB 12 effective July 1, 2024. Natural person owners or all natural person LLCs holding no more than two rental properties with four or fewer total units may collect two months' rent, except from service members.

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Schofield Properties manages rental homes and small apartment buildings across El Segundo, Manhattan Beach, Hermosa Beach, Redondo Beach, Torrance and Hawthorne. This article is general information, not legal advice. Rates and ordinances change annually, so confirm current figures with a licensed professional before acting.

Topics: security deposits, El Segundo, Manhattan Beach, California landlord law, LA RSO, AB 12, South Bay property management, rent stabilization

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