According to a new city ordinance, tenants will see a significant decrease in the amount of interest they receive on security deposits.
Madison City Council members voted Tuesday that landlords will be required to pay tenants interest on security deposits equal to the amount paid by financial institutions.
Under the previous ordinance, landlords paid tenants a flat rate of five percent interest on all deposits of a half-month’s rent or more.
The new plan, effective Jan. 1, 2004, will lower the interest rate to the changing market rate, which is currently at 1.39 percent.
The interest will be credited at the end of each lease term, and the new interest rate will be determined each year for new leases as well as lease renewals.
The previous ordinance also allowed landlords to keep interest earned on months when rent was not paid on time. The new plan requires interest to be paid for all months in the lease period.
District 8 Ald. Austin King was opposed to the ordinance.
“[The ordinance] still is and always has been a money grab,” King said. “Landlords used to earn 12 to 13 percent interest and pay us only five. Now that the prevailing interest rates have fallen below five percent, their plan is to give even less.”
King also said that many tenants in his area were not receiving any of the interest earned on their security deposits.
District 2 Ald. Brenda Konkel, an employee of the Tenant Resource Center, was also against the change. Konkel said one of the biggest problems was that there is no way to enforce the payment of interest unless students take landlords to small claims court.
District 6 Ald. Judy Olson voted in favor of the ordinance, but questioned how landlords and tenants would be made aware of the changes.
“Provided the landlords don’t come back in several years when the interest rates go above five percent, which we don’t expect to happen,” Olson said, “Everyone will benefit from it.”
Olson also added that, “It is a very complex problem, and it will require students to know what is in their contracts.”
City Council members also voted not to purchase items from corporations that were not bargaining in “good favor” with employees on strike and instead hiring replacement workers. This includes, but is not limited to Tyson foods. The University of Wisconsin has already decided not to purchase products from Tyson.
