Chapter 8.42
TENANT’S INTEREST ON SECURITY DEPOSIT FOR RESIDENTIAL RENTAL PROPERTY

Sections:

8.42.010    Definitions.

8.42.020    Application of chapter.

8.42.030    Accrual of tenant’s interest.

8.42.040    Payment of tenant’s interest.

8.42.050    Holding and transfer of tenant’s interest.

8.42.060    Investment of security deposit.

8.42.070    Notice of tenants.

8.42.080    Landlord’s use of tenant’s interest.

8.42.090    Remedies.

8.42.100    Waiver.

8.42.010 Definitions.

As used in this chapter, certain words and phrases are defined as follows:

“Security deposit” means, as provided in Section 1950.5 of the California Civil Code, any payment, fee or charge including, but not limited to, an advance payment of rent, used, or to be used, for any purpose, including, but not limited to, any of the following:

(1)    The compensation of landlord for a tenant’s default in payment of rent;

(2)    The repair of damages to the premises exclusive of ordinary wear and tear, caused by the tenant or by a guest or licensee of the tenant;

(3)    The cleaning of the premises upon termination of the tenancy;

(4)    To remedy future defaults by the tenant and any obligation under the rental agreement to restore, replace, or return personal property or appurtenances, exclusive of ordinary wear and tear, if the security deposit is authorized to be applied thereto by the rental agreement.

“Tenant’s interest” means an amount of simple interest per year on all security deposits in excess of $50.00 paid by a residential tenant to a landlord. The minimum rate of simple interest earned and payable under this chapter shall be established from time to time by resolution of the Board of Supervisors based on the recommendation of the Santa Cruz County Treasurer-Tax Collector as follows:

(1)    The Santa Cruz County Treasurer-Tax Collector shall contact a minimum of three major banking or savings and loan institutions in November of each year to determine the average interest rate that currently is being paid on savings passbook accounts. The Treasurer-Tax Collector shall compute the average of these rates as the recommended interest rate to be paid on security deposits in the following calendar year.

(2)    On or before the last meeting of the calendar year, the Treasurer-Tax Collector shall transmit to the Board of Supervisors a proposed resolution for adoption specifying the recommended interest rate.

(C)    A rental agreement may provide for a tenant’s interest at a percentage rate greater than that established by the Board of Supervisors resolution then in effect; however, under no circumstances shall a rental agreement provide for a tenant’s interest at a percentage rate less than that established by the Board of Supervisors resolution then in effect. Unless a rental agreement provides for a tenant’s interest at a percentage rate greater than that established by the Board of Supervisors resolution then in effect, the tenant’s security deposit shall bear interest at that percentage rate established by the Board of Supervisors resolution. [Ord. 4917 § 1, 2008; Ord. 4477 § 2, 1997].

8.42.020 Application of chapter.

This chapter applies to any rental agreement, written or oral, which is subject to the provisions of Section 1950.5 of the California Civil Code, that is, a rental agreement for property used as the dwelling of the tenant for 30 days or more; provided, however, that this chapter shall not apply where the rent is assisted or subsidized by any governmental unit, agency or authority, to the extent regulations of such government unit, agency or authority conflict with this chapter; nor shall it apply to units for which landlords are required by law to hold security deposits in noninterest-bearing accounts; nor shall it apply to public housing owned by the Santa Cruz County Housing Authority. [Ord. 4477 § 2, 1997].

8.42.030 Accrual of tenant’s interest.

Tenant’s interest shall begin accruing on January 1st, 1989, or on whatever date the security deposit is actually received by the landlord thereafter. [Ord. 4477 § 2, 1997].

8.42.040 Payment of tenant’s interest.

After every fifth year of a continuing tenancy, and upon termination of a tenancy of any length, landlords shall pay tenants accrued interest. The interest shall be paid within three weeks of the completion of the fifth year of a continuing tenancy, and within three weeks of the termination of any tenancy. [Ord. 5197 § 2, 2015].

8.42.050 Holding and transfer of tenant’s interest.

The holding of tenant’s interest on security deposits and the transfer of such interest on security deposits by a landlord to a successor-in-interest shall be subject to the same restrictions and procedures applicable to the principal amount of the security deposit pursuant to Section 1950.5 of the California Civil Code. [Ord. 4477 § 2, 1997].

8.42.060 Investment of security deposit.

Nothing in this chapter shall preclude a landlord from exercising his or her discretion in investing security deposits. [Ord. 4477 § 2, 1997].

8.42.070 Notice of tenants.

The landlord who is subject to the provisions of this chapter shall, at the time of entering into a rent or lease agreement with the tenant, provide the tenant with a written notice. The notice shall generally apprise the tenant of the tenant’s right to annually receive interest on his or her security deposit, shall apprise the tenant of the rate of interest to be earned on that security deposit, and shall apprise the tenant of the landlord’s potential liability for statutory damages for failure to comply with any provision of this chapter and for additional liability for statutory damages under California Civil Code Section 1950.5 for the malicious retention of the security deposit. If the tenant speaks Spanish as his or her primary language, the notice shall be in Spanish. [Ord. 4477 § 2, 1997].

8.42.080 Landlord’s use of tenant’s interest.

Upon termination of the tenancy, tenant’s accrued interest on any security deposit may be used by the landlord to supplement the tenant’s security deposit, if, after the landlord complies with California Civil Code Section 1950.5, the cost of verifiable repairs to the premises exceeds the security deposit. Tenant shall be given an accounting of any amount of the interest on security deposit used by the landlord for repairs of the premises. [Ord. 4477 § 2, 1997].

8.42.090 Remedies.

The failure of a landlord or successor-in-interest to comply with any provisions of this chapter after a tenant has requested the landlord or successor-in-interest to so comply in writing, shall subject the landlord or successor-in-interest to statutory damages not to exceed $200.00, in addition to any actual damages. [Ord. 4477 § 2, 1997].

8.42.100 Waiver.

Any waiver by a tenant of rights under this chapter shall be void as contrary to public policy. [Ord. 4477 § 2, 1997].