Santa Cruz County, California: security deposit interest

The rate for 2026 is 0.02%. Interest runs from the day the landlord receives the deposit, and it is paid out after every fifth year of a continuing tenancy and again when the tenancy ends, within three weeks of the fifth-year mark or of the move-out. The adopted rate is a floor: a lease may promise more but never less, and the landlord owes it regardless of what the money actually earned, because the county imposes no rule about where the deposit is held. A tenant whose landlord has not complied should ask in writing first — statutory damages of up to $200 plus actual damages reach only a failure that continues after that written request.

Santa Cruz County deposit interest at a glance

The rate

Section 8.42.010(B) defines the tenant's interest as an amount of simple interest per year on all security deposits over $50, and sets the minimum rate by resolution of the Board of Supervisors. The recommendation behind the resolution comes from the County Auditor's November survey of at least three major banking or savings and loan institutions, whose savings passbook rates are averaged into the rate proposed for the following calendar year; the proposed resolution goes to the Board on or before its last meeting of the calendar year. Section 8.42.010(C) makes the adopted rate a floor rather than a ceiling: a rental agreement may promise a higher rate, may never promise a lower one, and where the lease says nothing the deposit earns the resolution rate. The county's 2026 resolution records that all six banks surveyed in November 2025 reported 0.02% on savings accounts.

Accrual and payment

Interest starts running on the date the landlord actually receives the deposit, for deposits received after January 1, 1989. Payment comes after every fifth year of a continuing tenancy and on the termination of a tenancy of any length, and is due within three weeks of the fifth-year mark or of the end of the tenancy. That five-year cycle dates from a 2015 amendment to § 8.42.040, and the county's notice section was not updated to match it — § 8.42.070 still requires the landlord's notice to tell the tenant of the right to receive interest "annually." Both provisions are in the current code; the payment rule is the one in the payment section.

Who and what is covered

The chapter reaches the unincorporated county — cities within Santa Cruz County have their own ordinances or none, and Watsonville's is a separate chapter of its own code. Within the unincorporated area the duty covers any rental agreement, written or oral, for property used as the tenant's dwelling for thirty days or more, on deposits over $50. Three exemptions follow: tenancies where the rent is assisted or subsidized by a government body, to the extent that body's rules conflict with the chapter; units where a landlord is required by law to hold deposits in accounts that do not bear interest; and public housing owned by the Santa Cruz County Housing Authority.

Custody of the deposit

There is no separate-account or escrow duty. Section 8.42.060 provides that nothing in the chapter precludes a landlord from exercising discretion in investing security deposits, so the landlord chooses where the money sits and owes the Board's rate regardless of what it actually earns — and keeps anything above it. Section 8.42.050 leaves the holding and transfer of the accrued interest to the same rules Civil Code § 1950.5 applies to the deposit itself.

Penalty for violation

Statutory damages are capped at $200, plus actual damages, and they attach only where the landlord's failure continued after the tenant asked in writing for compliance (§ 8.42.090). The practical consequence for a tenant is that the written request comes first — without it the damages provision has nothing to bite on. Section 8.42.100 makes any waiver of the chapter's rights void as contrary to public policy. Under § 8.42.080 a landlord may apply the accrued interest toward verified repair costs that exceed the deposit itself, with an accounting to the tenant.

How this interacts with state law

California Civil Code § 1950.5 requires no interest on a security deposit and nothing in state law prevents a county from requiring it for its unincorporated area, which is what chapter 8.42 does. The chapter borrows the state statute's coverage test — a dwelling rented for thirty days or more — leaves the deposit's own return and accounting to state law, and requires the landlord's opening notice to warn the tenant of the state statute's liability for the bad-faith retention of a deposit. The interest duty is the county's addition on top.

Published rate tables

Santa Cruz County tenant's interest rates on residential security deposits

One figure per calendar year, adopted by resolution of the Board of Supervisors before the start of the year it governs and applied as simple interest to deposits over $50. The adopted rate is a minimum: a lease may set a higher rate, and then the lease rate governs.

A current series — the Board of Supervisors, by resolution adopted on or before its last meeting of the calendar year for the year that follows. Source: official source · verified August 29, 2026.

Work out a figure: the deposit interest calculator computes Santa Cruz County interest from this table using the locality's own published method.

Notes and caveats

• Payment is not annual, despite what the notice section says — Section 8.42.040 was rewritten in 2015 to require payment "after every fifth year of a continuing tenancy, and upon termination of a tenancy of any length," in each case within three weeks. The county's notice section, § 8.42.070, still tells landlords to inform tenants of the right to receive interest "annually" — it was never conformed to the 2015 change. Both provisions are printed in the current code. The payment rule is stated in the payment section; the mismatch is recorded here because a tenant reading the notice will expect a yearly payment that the payment section does not require.
• Ask in writing before anything else — The county's remedy is unusual in being request-conditioned: statutory damages of up to $200, plus actual damages, attach to a failure to comply "after a tenant has requested the landlord or successor in interest to so comply in writing." A tenant who is owed interest and simply sues has skipped the step the ordinance builds the remedy on. A short written request, kept with proof of delivery, is what starts the clock.
• The adopted rate is a minimum, not the whole rule — Section 8.42.010(C) says a rental agreement may provide for a higher rate than the Board's resolution and may under no circumstances provide for a lower one. Where the lease is silent, the deposit earns the resolution rate. So the number to use is the Board's figure for the year unless the lease itself promises more.
• Where the rule applies — Chapter 8.42 is county law, and it governs the unincorporated county. Incorporated cities inside Santa Cruz County are covered by their own ordinances or by nothing at all — Watsonville, for example, has its own security-deposit interest chapter with its own council-set rate and its own waiver rule. Which body of law applies turns on whether the rental is inside city limits.
• No rule about where the deposit is held — Section 8.42.060 states that nothing in the chapter precludes a landlord from exercising discretion in investing security deposits. There is no escrow, trust or separate-account duty, and no requirement that the account bear interest. The county's rate is owed whatever the money earns, which means the landlord keeps any spread above it and covers any shortfall below it.
• The interest can be drawn on for repairs, and cannot be waived — At the end of a tenancy, § 8.42.080 lets the landlord use the accrued interest to top up the deposit where verified repair costs exceed it, with an accounting given to the tenant. Against that, § 8.42.100 makes any tenant waiver of rights under the chapter void as contrary to public policy, so a lease clause giving up the interest is unenforceable.

Cite this page: "Landlord Atlas, Santa Cruz County, California: security deposit interest (verified August 29, 2026), landlordatlas.com/laws/deposit-interest/california/santa-cruz-county/" — free to cite and quote with a link (how these records are verified).

Citations

• Santa Cruz County Code ch. 8.42 (Tenant's Interest on Security Deposit) (verified 2026) Official source
• Santa Cruz County Code § 8.42.010 (the tenant's interest; the $50 threshold; the rate as a floor) · (B), (C) (verified 2026) Official source
• Santa Cruz County Code § 8.42.040 (payment after every fifth year and on termination) (verified 2026) Official source
• Santa Cruz County Code § 8.42.090 (remedies) (verified 2026) Official source
• County of Santa Cruz, Board of Supervisors Resolution 243-2025 (tenant interest rate for 2026) (verified 2026) Official source

How this record was verified: Complete read of Santa Cruz County Code chapter 8.42 (Tenant's Interest on Security Deposit), all ten sections — 8.42.010 definitions, .020 application, .030 accrual, .040 payment, .050 holding and transfer, .060 investment, .070 notice, .080 landlord's use, .090 remedies and .100 waiver — on the county code's current official site, with the ordinance history line on each section examined and the 2015 amendment to § 8.42.040 identified; and the Board of Supervisors' tenant-interest rate resolutions for 2025 and 2026 and the county's prior-years rate sheet read for the published series, alongside the City of Watsonville's annual notice letters, which carry the county's figure for the earlier years.

This page records local law on deposit interest. The statewide position — California's security-deposit statute says nothing about interest — no part of Civil Code § 1950.5 requires a landlord to pay or credit a tenant any interest on a residential deposit. — lives on the California deposit-interest page with its own citations and verification date.