Do El Segundo and Manhattan Beach Landlords Owe Interest on Security Deposits in 2026?

Published July 15, 2026

No. Only LA city RSO units require deposit interest (3.03% for 2026). El Segundo and Manhattan Beach owners owe none.

No. If your rental sits in El Segundo, Manhattan Beach, Hermosa Beach, Redondo Beach, Torrance, or the other South Bay cities we work in, you do not owe your tenant interest on their security deposit. California has no statewide law requiring it. The requirement only exists where a local rent stabilization ordinance imposes it, and the closest one, the City of Los Angeles RSO, sets its 2026 rate at 3.03%, but that ordinance stops at the LA city line.

Why this question keeps coming up

Owners hear "security deposit interest" from friends who have property in the City of Los Angeles, from property management forums that mostly discuss LA city rules, or from tenant screening services that default to LA city language. It is a reasonable thing to wonder about. But security deposit interest in California is not a statewide requirement at all. California Civil Code section 1950.5, the main statute governing security deposits statewide, covers the deposit cap, itemized deductions, the 21 day return deadline, and related procedures. It does not require interest payments anywhere in the state.

Where the interest requirement actually comes from

The interest requirement lives entirely inside local rent stabilization ordinances, and only where those ordinances specifically include it. Los Angeles Municipal Code section 151.06.02 requires landlords covered by the City's Rent Stabilization Ordinance to pay annual interest on deposits held at least one year, using a rate the Rent Adjustment Commission sets each year based on average interest paid by FDIC insured banks with LA branches the prior September. For 2026, that rate is 3.03%. It has to be paid to the tenant, either as a direct payment or a rent credit, at least annually, with written notice of which method the landlord is using.

That obligation is a creature of the LA city RSO specifically. It does not extend to the rest of Los Angeles County. El Segundo has no rent stabilization ordinance and no deposit interest requirement in its municipal code. Manhattan Beach, similarly, has no local rent control ordinance and imposes no deposit interest obligation. Neither does Hermosa Beach, Redondo Beach, or Torrance, none of which have adopted their own rent stabilization ordinances. If your property is not inside LA city limits and is not in an unincorporated LA County pocket covered by the County's own RSTPO (which has a separate, different set of rules), there is no interest obligation attached to the deposit at all.

The one place this gets more complicated

Unincorporated LA County communities like Lennox or West Carson fall under the County's own Rent Stabilization and Tenant Protections Ordinance, a completely separate ordinance from the LA city RSO with its own rent cap and its own rules. Whether that County ordinance carries a deposit interest requirement is a separate question from the city ordinance discussed here, so do not assume the County rules mirror the city's 3.03% figure. If you own in one of those unincorporated pockets, check the County ordinance directly rather than borrowing the LA city rate.

What this means for you

If your rental is in El Segundo, Manhattan Beach, Hermosa Beach, Redondo Beach, or Torrance, you can stop looking for a security deposit interest rate to apply. There is not one. Just keep doing the parts of Civil Code section 1950.5 that do apply everywhere in California: cap the deposit correctly, return it or account for deductions within 21 days of move-out, and keep receipts for any work you deduct for. If you ever do acquire a property inside LA city limits or in an RSTPO covered unincorporated pocket, that is the moment to check the applicable local rate, because it will not be zero.

If you would rather have someone else track which of your properties falls under which ordinance, that is what we do at Schofield.

This is general information, not legal or tax advice. Confirm with a licensed professional before you act.

Sources

1. Los Angeles Municipal Code, Section 151.06.02, Payment of Interest on Security Deposits
2. Los Angeles Housing Department, Rent Stabilization Bulletin: Interest Payment on Security Deposit
3. California Civil Code Section 1950.5
4. LA County DCBA, Rent Stabilization Program
5. Los Angeles Housing Department, RSO Overview

Last verified: July 2026.

Topics: compliance, security deposits, El Segundo, Manhattan Beach, rent stabilization

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Schofield Properties is a family run property management company at 323 Richmond St, El Segundo, CA 90245. We have managed the South Bay since 1972 and personally oversee about 186 doors today. Book a call to talk about your property.