Chapter 40
SECURITY DEPOSITS FOR RESIDENTIAL RENTAL PROPERTY*
Sections:
5-40.02 Application of Chapter.
5-40.03 Accrual of tenant’s interest.
5-40.04 Payment of tenant’s interest.
5-40.05 Investment of security deposit.
5-40.07 Landlord’s use of tenant’s interest.
* Chapter 40 entitled “Security Deposits for Residential Rental Property, consisting of Sections 5-40.101 through 5-40.108, codified from Ordinance No. 865-91 C-M, eff. June 27, 1991, as amended by Ord. Nos. 907-92 C-M, eff. October 22, 1992 and 995-95 C-M, eff. April 11, 1996, was repealed and replaced by Ord. 1045-98 C-M, eff. January 8, 1998.
5-40.01 Definitions.
As used in this Chapter, certain words and phrases are defined as follows:
(a) “Security Deposit” shall mean, 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 of license 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.
(b) “Tenant’s Interest” shall mean an amount of simple interest per year on all security deposits in excess of Fifty and no/100ths ($50.00) Dollars 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 City Council based on the recommendation of the City of Watsonville Administrative Services Director as follows: the City of Watsonville Administrative Services Director 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 saving passbook accounts. The Administrative Services Director shall compute the average of these rates as the recommended interest rate to be paid on security deposits in the following calendar year. The recommendation shall be forwarded to the City Manager. On or before the last meeting of the calendar year, the City Manager shall transmit to the City Council a proposed resolution for adoption specifying the recommended interest rate. A rental agreement may provide for a tenant’s interest at a percentage rate greater than that established by the City Council 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 City Council resolution then in effect. Unless a rental agreement provides for a tenant’s interest at a percentage rate greater than that established by the City Council resolution then in effect, the tenant’s security deposit shall bear interest at that percentage rate established by the City Council resolution.
(§ 1, Ord. 1045-98 C-M, eff. February 12, 1998)
5-40.02 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 thirty (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 non-interest-bearing accounts; nor shall it apply to public housing owned by the Santa Cruz County Housing Authority.
(§ 1, Ord. 1045-98 C-M, eff. February 12, 1998)
5-40.03 Accrual of tenant’s interest.
Tenant’s interest shall begin accruing on June 1, 1991, or on whatever date the security deposit is actually received by the landlord thereafter.
(§ 1, Ord. 1045-98 C-M, eff. February 12, 1998)
5-40.04 Payment of tenant’s interest.
(a) Annual Payment. For every tenant whose tenancy is continuing, the landlord shall without demand pay the tenant each year, no later than January 1st, the tenant’s interest for the previous calendar year or portion of the calendar year, in the form of either a draft payment or a credit against the tenant’s rent. The landlord shall choose between the two (2) methods of payment.
(b) Payment on Termination. Upon termination of the tenancy, a tenant shall be entitled to a direct payment of tenant’s interest no later than three (3) weeks after the tenant has vacated the premises.
(c) Landlord’s Failure to Pay Annual Interest. Should the landlord, as required by subsection (a) of this section, fail to disburse interest to the tenant by January 1st, or credit the tenant’s rent, the tenant’s interest shall, on a daily basis, accrue on the sum of the principal amount of the security deposit held by the landlord, plus the amount of any previous interest earned but not disbursed or credited.
(d) It shall be optional for landlord to pay their tenant(s) interest on security deposits held when the average interest rate is less than one-half (0.5%) percent.
(§ 1, Ord. 1045-98 C-M, eff. February 12, 1998, as amended by § 1, Ord. 1253-10 (CM), eff. February 11, 2010)
5-40.05 Investment of security deposit.
Nothing in this chapter shall preclude a landlord from exercising his or her discretion in investing security deposits.
(§ 1, Ord. 1045-98 C-M, eff. February 12, 1998)
5-40.06 Notice of tenants.
Each landlord who is subject to the provisions of this chapter shall post a notice at a conspicuous location within the residential premises to be leased or rented to the tenant. As an alternative to posting a notice, the landlord who is subject to the provisions of this chapter may, at the time of entering into a rent or lease agreement with the tenant, provide the tenant with a written notice. Either 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.
(§ 1, Ord. 1045-98 C-M, eff. February 12, 1998)
5-40.07 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.
(§ 1, Ord. 1045-98 C-M, eff. February 12, 1998)
5-40.08 Remedies.
The failure of a landlord or a 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 Two Hundred and no/100ths ($200.00) Dollars, in addition to any actual damages.
(§ 1, Ord. 1045-98 C-M, eff. February 12, 1998)
5-40.09 Waiver.
Any waiver by a tenant of rights under this chapter shall be void as contrary to public policy.
(§ 1, Ord. 1045-98 C-M, eff. February 12, 1998)