Request By:
Honorable Job D. Turner, III
Attorney at Law
404 First National Building
167 West Main Street
Lexington, Kentucky 40507
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in answer to your letter of January 13 in which you, on behalf of the Lexington-Fayette Urban County Housing Authority created pursuant to Ch. 80 KRS, request an opinion concerning the following:
"The Housing Authority operates approximately 1500 housing units in Fayette County for low income individuals and families. It requires a security deposit from all tenants upon entering into a rental agreement. It is required, as are all landlords in Fayette and Jefferson Counties if it requires security deposits, as it does, to place said monies in a separate account pursuant to KRS 383.580. Presently, the Housing Authority is keeping such deposits in a separate, non-interest bearing account. The question upon which the Housing Authority wishes an opinion is if such deposits were kept in an interest bearing account, to whom would the interest accrue, to the tenant or to the Housing Authority. At present, no litigation is in progress concerning this matter, nor is any contemplated."
KRS 383.580 provides that all landords of residential property requiring security deposits prior to occupancy, deposit same in an account used only for that purpose; however, this statute does not provide for or require interest payments on such deposits as in the case of public utilities under KRS 278.460. We do believe, however, that if security deposits are required and they are kept in interest bearing accounts, the interest accumulated should be refunded to the tenant upon his departure along with the deposit if there exists no outstanding indebtedness in connection with the tenant's account. The basis of this conclusion is found in the case of Union Light, Heat and Power Company v. Mulligan, 177 Ky. 662, 197 S.W. 1081 (1917), in which the court declared that:
". . . the rule permitting the company to require the deposit does not permit the company to hold the consumer's money without paying interest thereon. The requirement that the company should pay interest upon the deposits is but the complement of the rule that it may require a deposit."
We are also enclosing a copy of OAG 77-353 which may be of interest to you in which it cites the case of Commonwealth v. Kentucky Power and Light Company, 257 Ky. 66, 77 S.W.2d 395 (1934), which also appears to have some bearing on the question.
Since, however, we find no case direct in point, the answer to your question is obviously subject to litigation.