As a landlord, it's important to request a security deposit as part of the move-in process. There are lots of advantages to collecting security deposits, including helping you cover:

  • Unpaid rent: One of the most common problems experienced by landlords is unpaid rent. If your tenant fails to pay rent, you're entitled to deduct the payment amount from their security deposit.
  • Excessive cleaning costs: The tenant is expected to return the rental property to the landlord with the same level of cleanliness as when they moved in. If the rental unit is not as clean as it was at the beginning of the tenancy, the landlord is allowed to deduct the cleaning costs from security deposits.
  • Excessive property damage: Any damage that is not considered part of ordinary wear and tear should be charged to the account of the tenant. In addition, any alterations made without the approval of the landlord can also be deducted from the security deposit.
  • Unpaid bills upon move out: In most cases, the tenant will be responsible for paying the utilities during the term of the lease. However, if the tenant has unpaid utilities when they move out or are evicted, deductions from the security deposit may be used to cover these bills.

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California Security Deposit Law: Overview

Security Deposit Limit

Most states impose a limit on how much security deposit a landlord can require from their renters. According to California law, the security deposit limit depends on whether the said residence is furnished or not.

  • Furnished units: If the rental home is furnished, the landlord may charge a security deposit equivalent to up to three months' rent.
  • Unfurnished units: For rental properties that are not furnished, the maximum limit a landlord can charge as a security deposit is up to two month's rent.

However, a new bill was signed in October of 2023 that will limit security deposits to one month of rent for both unfurnished and furnished properties. This new limit will take effect in July of 2024.

Important Exceptions

  • Active service members. If the renter is an active member of the military, the landlord may only charge a security deposit equivalent to one month of rent for unfurnished homes and two months of rent for furnished rental units.

  • Pet deposit. In this state, a landlord may require their tenanrt to pay an additional pet deposit. However, people with disabilities can not be required to pay additional pet deposits if their pets are used as service or emotional support animals.

  • Mobile home space. For mobile homes, the maximum limit for a security deposit is equivalent to one month's rent.

Nonrefundable Fees

The state of California does not allow nonrefundable fees. All deposits should be returned to the renters when the lease term ends. The state laws clearly prohibits landlords from drafting a rental agreement stating that there are nonrefundable deposits.

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Storing a Tenant's Deposit

In some states, there are rules about how you should safe keep a tenant's deposit. For instance, Florida a landlord can choose to post a surety bond for the amount of the security deposit. They can also choose to keep it in an interest or non-interest-yielding bank account.

However, in California, there is no specific statute that the landlord must follow when it comes to keeping a tenant's security deposit.

Written Notice after Security Deposit Receipt

Under California landlord-tenant law, the landlord is not required to provide written notice to the tenant regarding the receipt of the security deposit.

Reasons to Withhold a Tenant's Security Deposit

Landlords can keep all or a portion of a renter's security deposit under certain conditions. In the state of California, you can use a security deposit:

  • To compensate for missed rent payments.
  • To cover the cost of repairs due to damages past normal wear and tear caused by the tenant.
  • To pay for the cleaning costs if the rental unit is not as clean as it was during the start of the tenancy.
  • To replace damaged or lost furniture and to restore the unit in accordance with the provisions of the rental agreement.

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Keep in mind that, in accordance with California's renters' rights concerning security deposits and to avoid security deposit disputes, the landlord cannot keep the deposit to cover conditions that existed before the tenant moved into the rental unit.

A Walk-Through Inspection

A walk-through inspection is required under California landlord-tenant law. The inspection helps to check the property's condition so landlords can give the tenant a chance to remedy identified deficiencies.

The landlord should inform the tenant about the inspection within a reasonable time. The inspection should not be scheduled for earlier than two weeks before the end of the lease or rental agreement.

Security Deposit Refund in California

You have 21 days to return all or part of the tenant's deposit after the tenant moves out of the residential property. If there are any deductions, you must provide a written, itemized statement of deductions upon returning the remaining security deposit.

Change in Property Ownership

If the landlord sells or transfers the ownership of the rental property before the lease term ends, the outgoing landlord has the following options:

  • The landlord may return the deposit to the tenant just as he would when the rental agreement ends, less any eligible deductions, listed in an itemized statement. The outgoing landlord must notify the new landlord that the deposit was returned to the tenant.
  • The landlord may transfer the security deposit to the new owner. The outgoing landlord is required to notify the tenant in writing about the transfer of the security deposit. The landlord should also state the name and contact address of the new owner in the notice.

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Conclusion

If you have specific questions about the security deposit law, it's best to hire the services of a qualified attorney. Alternatively, you can also seek help from a knowledgeable property management company. If you're looking for a rental property manager in California, reach out to Castle Companies at (925) 328-1240 and we'll be happy to serve you.

Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.