A security deposit is a one-time, refundable sum of money that is part of a tenant’s move-in expenses. Charging a security deposit can help protect a landlord from the financial ruin that can arise from tenant damages to property.
The state of California has laws that regulate how landlords should handle the deposits. These laws govern, for example, how much you can collect, where you should store it, and when you should return it.
In this post, you’re going to learn the basics of California’s security deposit laws. This knowledge can help you avoid potential issues with your tenant regarding the use and return of their deposit. However, remember that this post is not legal advice, and should only serve as an educational overview.
An Overview of Security Deposit Laws in California
Is there a limit to how much California landlords can charge tenants as a security deposit?
Yes, California law limits how much landlords can charge their tenants as a security deposit. How much a a landlord can collect also depends on whether you provide your tenant with furniture or not.
If you provide furniture, the maximum security deposit you can ask your tenant for can be equivalent to 3 months’ rent. Supposing you charge $1000 as monthly rent, the most you could request as security deposit would be $3000.
If you don’t furnish your rentals, then the most you can ask your tenant should be equivalent to 2 times the monthly rent. For example, the most you could ask for an unfurnished $1000 rental would be no more than $2000.
Can a landlord in California charge non-refundable deposits?
In the state of California, a landlord is prohibited from charging non-refundable security deposits. As per the statewide landlord-tenant law, a security deposit is viewed as a tenant’s property and should be refunded.
The deposit should be returned either partially or wholly to the tenant when their lease or rental agreement ends, depending on the condition of the rental unit.
How should landlords in California store a tenant’s deposit?
The responsibility of storing a security deposit is up to the landlord. For instance, in Iowa, a landlord must store a tenant’s security deposit in a separate bank account. In Florida, a landlord can place a renter’s security deposit in an interest-bearing account or post it as a surety bond.
However, California law doesn’t specify how a landlord must store a security deposit. Be sure to choose a storage method that is safe and easy to keep track of.
Do California landlords have to provide their tenants with a written receipt?
Providing a written receipt to the tenant for their security deposit is not a requirement under California law. Nevertheless, most landlords still issue their tenants a written receipt of the deposit to provide a record of the amount paid. This provides both tenants and landlords with a feeling of transparency and legitimacy.
A written receipt of a California security deposit typically details the amount paid, the date of payment, and where the deposit is being stored.
Can a landlord in California keep all or part of a tenant’s security deposit?
A California landlord can keep a portion or the entire security deposit in certain circumstances. The most common reasons include unpaid rent, covering the cost of excessive damage, and other breaches to the lease or rental agreement.
Please note, however, that a landlord cannot keep a security deposit to pay for conditions that the tenant had nothing to do with. In other words, a landlord cannot charge a tenant for repairs that existed prior to them renting the unit.
California landlords also cannot make deductions to the deposit to cover the cost of ordinary wear and tear. That’s because normal wear and tear isn’t considered damage to the residential property. Ordinary wear and tear occurs due to the normal aging of the building. Examples of normal wear and tear include smelly garbage disposal, worn gaskets on refrigerator doors, or faded bathroom tiles.
On the other hand, a landlord may be able to keep part or all of a tenant’s deposit to cover the cost of excessive property damages. Common examples include clogged drains due to improper use, bent or missing shower rods, and cracked or missing bathroom tiles. Tenants are responsible for basic upkeep in their units, including making sure to replace air filters.
Is a walk-through inspection necessary in California?
As a landlord, you can decide whether you want to conduct walk-in inspections. The ultimate goal of a walk-in inspection is to help document the unit’s condition and to give the tenant time to make the necessary remedies before the tenancy is over. If you choose to conduct a walk-in inspection, here are some steps you must take:
You must provide your tenant with a written notice stating your intent to inspect the premises.
If the tenant obliges (they don’t have to), you must schedule for it to occur no later than 2 weeks before the expiry of the rental agreement.
You must provide your tenant with 2 days’ notice prior to the inspection date.
You must provide your tenant with an itemized statement of necessary repairs if any.
How long do California landlords have to return security deposits?
As a California landlord, you have exactly 21 days to return the deposit back to your tenant after they move out.
You must also provide a written document that states the amount of the security deposit that you received. You’ll also have to include itemized deductions, if any. The notice should include documents and receipts indicating the costs incurred on labor, materials, professional charges, etc. If no work has been done yet, you must deduct good faith estimates.
Finally, the landlord’s written notice must indicate how much of the money is being returned to the tenant.
What if you sell the property mid-tenancy?
In the case that the residential property is sold during a tenant’s lease, you will have two options. The first option is that you may choose to transfer the security money to the incoming landlord, minus any appropriate deductions. In this case, you should notify the tenant of the change in ownership, stating the name and address of the incoming landlord.
You would also have to notify the incoming landlord of the deposit amount, as well as any deductions made to the deposit. The new landlord or owner would then become responsible for the tenant’s security deposit. The other option if you sell the unit would be to return the deposit back to the tenant at the time of sale, minus necessary deductions. You would then have to notify the incoming landlord or owner of three things: the security deposit amount, an itemized statement of deductions made, and the decision to return the deposit to the tenant.
The Bottom Line
When it comes to security deposits, it’s important to maintain a commitment to transparency and legality every step of the way. As the landlord of a rental unit, you want to avoid time-consuming security deposit disputes.
Your tenant also has the right to have their deposit returned if they treat your home with care and respect.
Do you have additional questions? If so, we can help. Archer Management Group is a professional property management company serving property owners in Murrieta, Menifee, French Valley, Lake Elsinore, and Canyon Lake, as well as San Diego, Orange, and San Bernardino County, among many more!