Property Management Blog

What Do I Need To Know About California Security Deposit Laws?

Property Management Blog

Most Escondido landlords require their tenants to pay a security deposit before moving into their rental. A security deposit is a one-time refundable payment, usually equivalent to one month’s rent, that helps cushion financial blows if the tenant vacates without paying rent or incurs excessive damage to the property. As a landlord, it is important to be familiar with California’s security deposit laws, so you can protect your rental property and know your tenant’s rights. 

Reasons to Keep a Security Deposit

There might come a time when you need to keep your tenant’s security deposit, so it is crucial you know in what circumstances you are allowed to use it. 

Here are the main reasons why a landlord is allowed to keep a portion, or all, of the security deposit. 

  • To cover lost rental income. If a tenant terminates their lease early without just cause, you are allowed to deduct the appropriate costs from the tenant’s security deposit.

  • To cover losses from missed rent payments. If a tenant fails to pay rent, they are in violation of the lease agreement and subject to deduction of their security deposit.

  • To cover any damage exceeding normal wear and tear. This is any damage to the property that occurs as a result of abuse or neglect by the tenant. As the landlord, you are allowed to deduct any costs resulting from neglect from the security deposit.

Here are a few examples of normal wear and tear vs. excessive damage:

Important: In California, landlords are required to provide renters with advance notice before taking any deductions out of the security deposit, such as for the cost of repairs for damage to the property. 

Security Deposit Limit

California’s landlord-tenant laws limit how much a landlord can charge for their security deposit. If the rental is unfurnished, the landlord can charge a maximum of two months’ rent. For example, if the rent is $2,000, then you can charge a maximum of $4,000 for the security deposit. 

If the rental is furnished, the landlord is allowed to charge a maximum of three months’ rent for the deposit. So this means if monthly rent is $2,000, then you can charge a maximum of $6,000. 

However, if the tenant is an active duty member, you can only charge a maximum of one month’s rent for an unfurnished rental and two months’ rent for a furnished property. 

California landlord-tenant laws also allow landlords the option of adding an extra one-half month’s rent to the security deposit if the tenant has a waterbed. 

It is important to note that California does not allow landlords to charge non-refundable security deposit fees. The state of California recognizes the security deposit as the renter’s property, unless legal deductions (like the ones stated above) are incurred. 

How to Store the Security Deposit

It is the landlord’s responsibility to store the tenant’s security deposit. Most states dictate exactly how deposits should be stored, but California law does not. Landlords do not have specific requirements for storing the deposit, as long as it is kept secure for the tenant. 

Keep a Security Deposit Receipt

Unlike states like New York and New Hampshire, California does not require landlords to provide a written notice after a tenant’s security deposit is received; however, it is still a good idea to keep a receipt. Make sure to document proof of the amount received, the date it was received, and where the deposit is stored. This will prevent any confusion or disputes when returning the security deposit.

Consider Conducting a Walk-Through Inspection Prior to Your Tenant’s Move-Out Date

Conducting a walk-through inspection before a tenant moves out gives the tenant the opportunity to fix the damages so that deductions are not taken from their security deposit. Walk-through inspections are not required, so both parties (landlord and tenant) must agree. 

If you and your tenant decide to conduct an inspection prior to your tenant’s move-out date, here are some requirements you should be aware of:

  • As the landlord, you must provide the tenant with adequate notice of your intention to inspect the property.

  • If the tenant agrees to an inspection, the walk-through must be done no sooner than 14 days prior to the end of the lease.

  • As the landlord, you must notify the tenant of any needed repairs prior to the final walk-through inspection.

When to Return the Security Deposit

California state law requires landlords to return the tenant’s security deposit within 21 days after the tenant has moved out and returned the property keys. Landlords must also include a notice listing the amount of deposit received, an itemized statement of any deductions, and the amount of deposit returned to the tenant.

Change in Property Ownership

If you sell the property before your tenant’s lease is up, you have two options for handling the security deposit. One, you can transfer the security deposit directly to the new owner. Two, you can return the deposit back to the tenant.

If you have additional questions regarding security deposit laws or would like to speak with one of our professionals--Give us a call!

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