What is the penalty for failure to deposit and maintain a security deposit?

• A. 5% per 30 days, up to $1500.
• B. 10% of the increase not timely filed or $5000, whichever is less, for each 30 days or portion thereof.
• C. 1% per day.
• D. No penalty.

Answer: (B)

The penalty is assessed for each 30-day period (or portion thereof) that the security deposit is not timely filed or maintained, and it equals the lesser of 10% of the amount that was not timely filed or $5,000. This means the longer the failure continues, the more penalties accrue in blocks of 30 days, up to the cap per period.

For example, if an increase in the deposit that should have been filed is $30,000, the penalty per 30 days would be 10% of $30,000 = $3,000 (which is under $5,000). If this failure continues for three 30-day periods, the total penalty would be $9,000. If the unfiled increase is $70,000, 10% would be $7,000, but the maximum per 30-day period is capped at $5,000, so the penalty would be $5,000 for each 30-day period the failure persists.

Because there is a per-period, capped penalty for delays, this option correctly reflects how the SIP enforces timely deposits, whereas other rates (like 5% per period or 1% per day) or no penalty do not match the established rule.