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California Security Deposit Law

security deposit

When you rent your property in California, you can collect a security deposit from your tenants. The security deposits in California will help you cover from unexpected losses, such as unpaid rent, or property damage.

The security deposit law is part of the California landlord-tenant law.

As a landlord, you must strictly follow the California security deposit laws. So, in this post, we will provide you with an overview of the state’s security deposit law by answering some frequently asked questions!

Let’s get into it!

How much can California landlords charge a tenant as a security deposit?

Under California law, there’s a security deposit limit, and this limit depends on whether you’re offering a furnished or unfurnished residential property.

For a furnished residential property, the maximum amount of security deposit landlords can collect from their tenant is 3X the rent amount.

For unfurnished rentals, the maximum landlords can collect from a tenant is 2X the monthly rent amount.

Can California landlords charge a nonrefundable security deposit?

No. You cannot charge nonrefundable security deposits in the state of California. All deposits you collect from your tenant at the start of the tenancy must be returned when the tenant moves out.

rental deposit law

How should you store your tenant’s security deposit?

As a landlord, it’s your responsibility to store all tenants’ security deposits. While some states specify where you must store the deposits, the California security deposit law doesn’t.

That means that you are free to store your tenant’s deposit in any financial institution you choose. The account can be interest-bearing, but it doesn’t have to be.

That said, be sure to check the local laws, especially if your rental is in Los Angeles, San Francisco, or West Hollywood. For more help, you can contact the city’s rent control board.

What deductions can a landlord make on a tenant’s security deposit?

Under California law, you have a right to deduct certain costs from your tenant’s security deposit. Allowable deductions from a tenant’s deposit include:

  • Unpaid rent
  • Cost of repairs for damage caused by tenant negligence
  • Cleaning costs in case the tenant leaves the rental unit in a dire state of uncleanliness
  • Restoration costs provided for under the lease or rental agreement

Note, however, that you cannot deduct from a tenant’s deposit in the following situations:

  • To fix repairs that existed prior to the tenant signing the lease or rental agreement
  • To fix repairs that result from ordinary wear and tear

But what exactly is normal wear and tear? Damage from ordinary wear and tear is one that occurs during the normal ageing of the property.

Examples of normal wear and tear include:

  • Door handles becoming loose after some time
  • Wearing away of the silver finish on bathroom fixtures
  • Fading of the hardwood finish due to sunlight exposure

What you can, however, hold your tenant responsible for are damages such as:

  • Broken or missing door handles
  • A broken toilet seat
  • A smashed bathroom mirror

Can a California tenant use their security deposit as last month’s rent?

No, the California tenant can’t use their security deposit as last month’s rent.  The only exception to this is if the California landlord and tenant have agreed to this in the lease or rental agreement.

security deposit california

Does a California tenant have a right to a walk-through inspection?

Yes. California tenants have this right.

However, to conduct one, you must follow specific steps:

  1. You must let your tenant know that you have a right to a walk-through inspection in the lease. The tenant may, however, choose to waive this right.
  2. The inspection must occur 2 weeks prior to the expiry of the lease agreement.
  3. Before the inspection day, you must serve the tenant with a 48 hours’ notice. The notice must state the time and date of the inspection.

The purpose of a walk-through inspection is to help document the unit’s condition. You have a right to withhold part of their deposit if the tenant has made excessive property damage.

When should you return a tenant’s security deposit?

Under California law, after a tenant moves out, you have 21 days to return a tenant’s security deposit, or what’s left of it.

In case you’ve only returned a fraction of the security deposit to the tenant, you must prepare an itemized statement listing the damage and send the itemized statement alongside the remaining security deposit to the tenant’s last known address.

There is an exception to this, though. If the deductions don’t exceed $125, you don’t have to provide an itemized statement to the California landlord.

What may happen if you don’t return the security deposit to the tenant as required?

Security deposit disputes are common. If you don’t return the deposit to the tenant, you risk getting sued by your tenant in a small claims court. If the ruling at the small claims court is made in the tenant’s favor, you may end up paying up to 2X the security deposit in damages, on top of the initial deposit.

Are California security deposits taxable?

No, they aren’t taxed as they are not considered to be the income of a landlord. A security deposit will only be taxed when a landlord doesn’t have any obligation to refund them.

how long does a landlord have to return a deposit

What happens if you sell your rental property?

If you sell your unit in the middle of a lease, the former landlord has two options to consider.

  1. Transfer all the tenants’ security deposits to the new owner’s name, less any deductions. You must then notify the tenant of the same. The written notice must also include the name, address and contact information of the incoming landlord. You must also let the new owner know of the transferred amount and the deductions made, if any.
  2. Return the security deposit back to the tenant, less any deductions. You must also let the new owner know of the same.

The Bottom Line: California Security Deposit Laws

As a landlord, it is crucial that you are familiar with the California security deposit laws to protect your interests. If you are seeking more information on California state law, please feel free to contact Realevate Specialists.

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This information is only meant to educate and not serve as legal advice. For further help, please consult an experienced property management company.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.