Rohnert Park Municipal Code Ch. 9.71 Payment of Interest on Security Deposits

The city council is aware of the fact that California law, and specifically California Civil Code §§ 1950.5 and 1950.7, allow a landlord to require a prospective tenant to deposit with, or make available to the landlord, if necessary, a security deposit to assure the landlord for failure of the tenant to pay the rent; to provide for a fund for repair of the premises if it is damaged substantially by the tenant; to clean the premises upon termination of the tenancy and for other purposes as set forth in the statutes. The city council also is aware and so finds that some security deposits remain with the landlord for long periods of time because the tenancy lasts for a long time or the tenancy changes but the new tenant(s) immediately follows the former tenant(s) and the security deposit is left on deposit with the landlord or is immediately replaced so that there is no loss of the benefit of the deposit to the landlord. The council is also aware of the fact that for residential property the advance payment authorized by Civil Code § 1950.5(c) can be as much as to six months rent in situations where the term of the lease is six months or longer. The council is also aware of the fact that Pacific Gas & Electric Company either pays interest on security deposits paid by utility customers required to deposit funds with the company to secure the payment of utility accounts with the company, subject to reasonable conditions regarding timely payment of the account and other related regulations, or returns the security deposit after a year's payment experience with no more than two months' delinquency in the first twelve months.

(Ord. 587 § 1, 1994)

The city council hereby defines the following words or phrases as used in this chapter as follows:

A. "Landlord" means the person or entity that owns the real property being rented. Landlord also means the person or entity that has entered into a lease/rental agreement with tenant to lease or rent the real property to the tenant.

B. "Interest rate" or "rate of interest" means the average rate of interest, based on regular (standard) consumer savings accounts paid by the three largest banks, by funds held, in Rohnert Park.

C. "Lease" or "lease/rental agreement" means the agreement, whether oral or written, by which the landlord grants the tenant the right to inhabit, occupy or use real property owned or controlled by the landlord.

D. "Security deposit" means the payment, fee, deposit or charge required, imposed or assessed by the landlord and required to be deposited with or kept by the landlord for any of the following:

1. The compensation of a landlord for a tenant's default in the 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 in any obligation under the lease/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 lease/rental agreement.

E. "Tenant" means a person or persons who have entered into a written or oral lease/rental agreement with the landlord by which the tenant is granted the right to inhabit, occupy or use improved real property subject to the lease/rental agreement.

(Ord. 649 § 1, 1999: Ord. 587 § 2, 1994)

(Ord. No. 845, § 2, 3-27-2012)

A landlord shall pay interest on security deposits placed with the landlord when requested by a tenant at the time the lease/rental agreement is signed at the interest rate provided in Section 9.71.020B after the security deposit has been held by the landlord for twelve consecutive months without a default in timely payment of the rent as provided in the lease/rental agreement. Payment within the default or grace period, if any, provided within the lease/rental agreement shall be considered timely payment.

Before the lease/rental agreement is signed by the tenant the landlord shall give the tenant written notice of the tenant's right to receive interest on the security deposit so that the tenant is aware of his or her rights regarding the payment of interest before he or she signs the lease/rental agreement. If the landlord fails to advise the tenant in writing and if the tenant would otherwise qualify to receive interest as provided in this section then the tenant shall have the right, at the option of the tenant, to demand or receive interest payments on the security deposit, as herein provided, after the first twelve months of the lease/rental agreement.

Notwithstanding the provisions of the foregoing paragraph, the tenant shall have the option of negotiating a lease or rental agreement with the landlord which allows the tenant to waive or forego the obligation of the landlord to pay interest on the security deposit.

(Ord. 643 § 2, 1998: Ord. 587 § 3, 1994)

The landlord shall be entitled to deduct and retain a charge for maintaining and administering the security deposit and for computing and paying interest payments therefrom as provided in this chapter. Interest shall be paid no less frequently than annually or at the time the tenancy ends. The amount of the administrative charge which the landlord may retain is ten percent of the interest amount payable to the tenant.

(Ord. 644 § 1, 1999)

This chapter shall apply to interest payments on security deposits for residential property rentals only, except for security deposits held by mobile home park owners or managers subject to the California Mobile home Residency Law, which security deposits are exempt from the requirement to pay interest thereon to the homeowner pursuant to California Civil Code § 798.36(e).

(Ord. 649 § 2, 1999: Ord. 587 § 4, 1994)

This chapter is enacted to supplement and complement state law and is not enacted for the purpose of contravening or contradicting state law. In addition, it is the purpose of this chapter to provide a remedy for an inequity the city council perceives to exist with regard to tenant security deposits. The city council declares that no city personnel, no city funds and no city resources shall be used in administering, enforcing or otherwise prosecuting this chapter. The purpose of this chapter is to provide, by city ordinance, a legal remedy for tenants who do not receive interest on security deposits, but who qualify as provided in this chapter.

(Ord. 587 § 5, 1994)

Notwithstanding any other provision of this chapter, this chapter shall be suspended and be of no force or effect until such time as the interest rate, as defined by Section 9.71.020.B, reaches five percent. At such time, the housing director shall return this ordinance to the council to consider lifting the suspension.

(Ord. No. 845, § 2, 3-27-2012)