California landlord-tenant law grants landlords the right to ask tenants for a security deposit before moving in. By doing so, you can shield yourself against possible financial losses arising from renting out the unit to negligent tenants.
However, California law obligates landlords who ask for security deposits to follow certain rules. Among other things, you must charge the right amount and return it within the required timeframe. The following is a basic overview of California security deposit laws:
Security Deposit Limit
California state law requires landlords not to exceed a certain limit when collecting a security deposit. That limit is dependent upon whether the unit is furnished or not. You can only ask for a maximum security deposit limit of 3X the monthly rent for furnished rentals. For unfurnished units, the amount is capped at 2X the monthly rent.
Storage Rules
As a landlord, it’s your responsibility to store the tenant’s security deposit. Some states have rules on how landlords should go about doing it. However, for others like California, state law doesn’t include specific requirements for doing so.
You can store the tenant’s deposit anyhow you like, whether in an interest-bearing account or a normal account. There is also no requirement as to whether landlords can combine it with personal funds or keep it separate.
Security Deposit Receipt
California law doesn’t require landlords to provide their tenants with documentation acknowledging the receipt of their deposit. Nevertheless, it’s standard practice among landlords to do so. This is because proper record-keeping is always a good idea. You’ll have written proof of when you received it, how much you received, and how you’re storing it.
Security Deposit Deductions
California law gives landlords the right to make appropriate deductions to a tenant’s deposit under certain circumstances. You can make appropriate deductions for the following reasons after the tenant moves out:
- Missed rent payments. If they move out without meeting their contractual rent payment obligations, you can make appropriate deductions on their deposit.
- Lost rent payments. If the tenant chooses to abandon their rental unit or break their lease without a legally justified reason, you may be able to recoup some of the losses by making deductions on their deposit.
- Cost of cleaning the property. You can also use part of the tenant’s deposit to restore the unit to its original condition.
- Breaches to the lease agreement. Examples of such violations include unauthorized subletting, pet damage, and unauthorized property alterations.
- Damage exceeding normal wear and tear.
Difference Between Damages and Normal Wear and Tear
Common examples of property damage include:
- Large holes or excessive staining on the carpet
- Graffiti or peeling paints
- Cracked frames or broken glass on windows
- Deep scratches or burns on kitchen countertops
- Missing, cracked, or broken fixtures
- Burst pipes or clogged pipes lead to water damage
Examples of normal wear and tear include:
- Minor scratches or worn handles on windows
- Slight fading of the carpet due to normal use
- Minor scuffs or scratches on the paint
- Light stains or minor scratches on kitchen countertops
- Minor scratches on bathroom fixtures
- Light stains or minor scratches on kitchen countertops
- Slow drainage of the plumbing
Damage results from the tenant’s misuse, carelessness, or negligence. If the tenant moves out of the unit before fixing such type of damage, you can make appropriate deductions from their deposit. Landlords are, however, responsible for damage resulting from normal wear and tear.
Walk-Through Inspection
As a landlord in California, whether to do a walk-through inspection or not is solely up to you. That said, it’s recommended to perform it to ascertain the condition of the property before the tenant moves out.
From the inspection report, you’ll also know whether or not the tenant is liable for any damage exceeding normal wear and tear. With that in mind, you’ll need to adhere to the following rules during the inspection as per state law:
- Notify the tenant of your intention to perform a walk-through inspection at least 2 weeks before the end of the tenancy.
- Notify the tenant at least 48 hours before the inspection, indicating the time and date of the inspection.
- Present the tenant with your findings before the final inspection.
Security Deposit Return
In California, landlords need to return part or all of their tenant’s deposit within 21 days of them moving out. If returning the deposit partially, you must provide the tenant with an itemized statement. In the statement, you must indicate the following things:
- The original security deposit amount you received.
- The itemized deductions.
- A good faith estimate of the projected costs of the repair work if the work is yet to be completed.
- The amount of deposit you’re returning to the tenant after the deductions.
Sale of Rental Property
If selling the rental property, you’ll have two options when it comes to the tenant’s security deposit. One option is to transfer the deposit, minus allowable deductions, to the incoming landlord. You must then inform the tenant of the new landlord’s name and contact information.
The other option is to return the deposit to the tenant, minus deductions. You must let the new residential landlord know of the amount returned to the tenant and what deductions you’ve taken.
Bottom Line
The California Security Deposit Law is an important legislation for landlords. Failure to follow these rules can have a repercussion on your reputation and your finances.
If you have a question or need help from a property management expert, look no further than Penny Realty, Inc. We offer full-service property management services to San Diego property owners and investors. Get in touch now!
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.
