The California security deposit law protects both landlords and tenants. As a landlord, the law surrounding security deposits and evictions protect you against the potential financial ruin that can arise from certain tenant negligent actions such as damage exceeding normal wear and tear.
For the tenant, the law provides them with certain rights. For example, the right to timely refund after they move out.
When requiring security deposits from tenants in California, there are certain things you must keep in mind when following the rental laws. Read on to know more about the security deposit laws in California.
Security Deposit Limit
Unfortunately for landlords in California, there is a cap on how much security deposit you can charge tenants. The entire security deposit depends on whether the property you’re letting is a furnished unit or not.
For unfurnished rentals, you can ask for a security deposit of up to 2 month's rent. For units that are furnished, you can ask a tenant for a maximum of 3 month's rent as security deposit.
The higher security deposit for furnished units is due to the increased potential for damage. Such units often contain additional items like appliances, furniture, and décor that are more susceptible to wear and tear.
By asking for a higher security deposit, often equivalent to one or more month's rent, you’ll be better positioned to cover potential costs for repairs or replacements.
Setting the deposit based on a month's rent helps ensure you’re protected if any furnishings or equipment need to be repaired or replaced after a tenant moves out.
Non-Refundable Security Deposits
In California, all security deposits are refundable at the end of the lease term, minus any allowable deductions.
It would be illegal to charge a pet deposit. The pet fee must be refundable at the end of the lease term, provided the pet doesn’t cause any property damage.
Any payment other than the first month’s rent must be refundable at the end of the lease term.
Storing a Tenant’s Security Deposit
As a landlord, it’s your responsibility to store a tenant’s deposit after you receive the payment. California law, however, doesn’t specify how landlords must pay attention to storing these funds.
You can store the deposit in a separate account, a normal account, or an interest-bearing account. Some landlords also choose to pay the tenant any interest earned, depending on local regulations.
Just make sure the deposit is available to the tenant at the end of the lease term, minus any allowable deductions as specified in the lease.
Security Deposit Receipts
In some states, landlords must provide tenants with receipts after receiving their security deposit. This is, however, not the case in the state of California.
You may, however, want to do it for your own record-keeping purposes and not out of obligation. It is always a good idea to have details about the amount and date received, and how you’re storing it.
Reasons to Keep a Tenant’s Security Deposit
Landlords can keep part or all of a tenant’s security deposit in California. That must be justified and the amounts withheld must both be appropriate and reasonable.
The following are the reasons that can justify a landlord to make deductions on a tenant’s security deposit in California:
- Failure by the tenant to pay rent before moving out constitutes unpaid rent. Landlords are entitled to deduct this unpaid rent from the tenant's security deposit.
- Failure by the tenant to clear their due utility bills before moving out.
- Costs of restoring the unit’s cleanliness standards after a tenant moves out.
- Any restoration costs mentioned on the lease agreement.
- Costs of fixing damage exceeding normal wear and tear.
What is normal wear and tear and what type of damage qualifies as one? The following are common examples of such type of damage:
- Lightly scratched glass
- Gently worn carpets
- Stained bath fixtures
- Loose door handles
- Faded paint and flooring
Damage, on the other hand, exceeds normal wear and tear. Examples include:
- Holes in the wall
- Missing fixtures
- Heavily stained carpets
- Broken windows
- Missing tiles
A tenant is liable for the costs of fixing damage exceeding normal wear and tear. Landlords are responsible for the costs of fixing damage arising from normal wear and tear. Making this distinction is important when it comes to security deposit deductions.
It would be unlawful of you to require the tenant to pay for costs of fixing normal wear and tear. The same goes for any pre-existing damage in the unit.
Walk-Through Inspections
Walk-through inspections aren’t legally required in California, however, they can be important to prevent potential conflict when it comes to security deposit deductions.
If you choose to conduct one, then you must follow certain steps:
- Notify the tenant in writing that you intend to have a walk-through inspection of their rented premises.
- If the tenant agrees to the inspection, you must schedule it at least 2 weeks before the lease expires.
- Before the date of the inspection, you must provide the tenant with a notice of at least 48 hours. The notice must state the time and date of the inspection.
- After the inspection, you must provide the tenant with a list of any repairs they would need to fix before moving out.
Returning a Tenant’s Security Deposit in California
You have up to 21 days to return a tenant’s security deposit in California after they move out. If you’ve held on to any part of the tenant’s deposit, you must send part of the deposit with an itemized statement.
The itemized statement must provide the tenant with the following details:
- The initial amount of the security deposit you received from them.
- The deductions you’ve made, including any supporting documents and receipts.
- An estimate of the costs of any pending works if not completed.
- The portion of the security deposit you’re returning to the tenant.
Sale of Rental Property
Landlords who intend to sell their residential rental properties must abide by certain rules when it comes to tenants’ security deposits.
When transferring the deposit to the incoming landlord, you must do the following:
- Notify the tenant of the contact details of the incoming landlord.
- Notify the new landlord and the tenant about the security deposit amount and any deductions you’ve made.
If transferring the deposit to the tenant, you must do the following:
- Notify the new landlord of the security deposit amount transferred to the tenant.
- Any security deposit deductions you have made.
Conclusion
This guide has laid out the key basics of the California security deposit laws that every landlord charging security deposits must know.
If you have any questions about security deposit laws or need expert property management help in Hollister, CA, get in touch with H&M Property Management. You can trust us for experienced and quality property management services. Get in touch today!
Disclaimer: Please note that the information provided in this blog is intended for general guidance and should not be considered as a replacement for professional legal advice. It is important to be aware that laws pertaining to property management may change, rendering this information outdated by the time you read it.