California Law: Security Deposits

You might not pay much attention to a security deposit when you move into a new apartment or house but when you move out, those two words – security deposit – often cause tempers to flare. In California, the law sets out very specific rules for how much of a security deposit a landlord is allowed to demand and how it must be treated when the tenant moves out. A tenant in a rent control jurisdiction will enjoy additional rights.

​Read More:​ California Security Deposit Law: A Guide for Landlords & Tenants

When landlords and tenants in California enter into a rental agreement, each party agrees to do certain things. The landlord's basic responsibility is to turn over the unit for use by the tenant, which happens at the beginning of the relationship, and then keep it safely maintained. The tenant has a number of continuing obligations such as paying rent, keeping the unit undamaged and returning it in reasonably good condition.

Landlords ask for security deposits as a hedge against a tenant's failure to live up to their responsibilities under the agreement. It can protect a landlord financially in case the tenants don't pay rent. The landlord can use the security deposit to clean or repair the property if it is left a mess instead of having to file a lawsuit. But that doesn't mean that all cleaning or repairs are covered.

​Read More:​ What Can a Landlord Deduct From a Residential Security Deposit in California?

As far as landlords go, the bigger the security deposit, the more protection they have against tenant damage. But the state of California puts the brakes on expanding security deposit amounts. The state's landlord-tenant laws, set out in the Civil Code, establish a maximum amount of a security deposit that a landlord can demand.

Maximum security deposit amounts in California are measured as a multiple of one month's rent. If the landlord rents out an apartment or house that is not furnished, the maximum security deposit permitted is twice the amount of a month's rent; if the unit is furnished, the maximum security deposit is three times the rental amount.

For example, if a landlord rents out an apartment that $1,000 a month, he could require a $2,000 deposit if the unit is rented unfurnished. He could ask $3,000 if the apartment is rented furnished. With a luxury property that rents for $10,000 a month, the landlord could require a $20,000 or $30,000 security deposit. Note that there is no statutory limit on the amount of security deposit that a landlord can charge in commercial rental transactions.

Landlords can't escape these maximum deposit limitations by using different terms for security deposit like pet deposits, key deposits, carpet deposits, last month deposits or cleaning deposits. It is perfectly permissible under California law for a landlord to call a deposit one of these names, but it will not increase the security deposit limit.

For example, if you rent an unfurnished apartment for $2,000, the maximum security deposit will be $4,000. All deposits added together must not exceed that amount. And giving the deposit a specific name, such as pet deposit, opens up the issue of whether it can be used for some other type of deposit (such as keys or cleaning), which is a question left to the courts.

Landlords sometimes describe a deposit as "nonrefundable" in the rental agreement. Often these involve pets or keys, but those are not the only examples. The intent generally is for this to be a fee that the tenant must pay to move into the unit. However, this is not permitted under California law.

What if a tenant signs a rental agreement that contains a nonrefundable deposit? That does not obligate the tenant to pay the fee. Even if the nonrefundable status of the deposit is not challenged until the very end of the tenancy, it remains invalid. If the tenant pays all rent owing and leaves the unit in the same condition as when it was rented, minus reasonable wear and tear, the landlord must refund the deposit.

A landlord can use the security deposit to cover any unpaid rent during the tenancy. If the tenants or their guests damaged the unit, broke windows or punched holes in the walls, the landlord can deduct the cost of repairs from the security deposit. Likewise, if the tenants moved into a clean unit and returned a filthy one, the landlord can deduct cleaning costs from the deposit.

But a tenant is entitled to notice of any cleaning or damage issues before moving out. Tenants have the right to a walkthrough report two weeks before they move out. At that time, the landlord has to specify the damage to be repaired or cleaning that is needed for the security deposit to be returned.

The tenant is free to do these repairs or object to them if they seem unreasonable. Once the tenant moves out, the landlord inspects again and can only withhold security deposit money for items on that list, unless damage turns up that had been hidden.

Since tenants are paying for the right to use and occupy the premises, the landlord cannot charge them for ordinary wear and tear. Some wear and tear is to be expected and cannot be avoided as a person lives in a property. The amount of wear and tear considered normal increases the longer the tenants live in the place.

The landlord cannot use the security deposit to replace the carpet, for example, or repaint the yellowed walls if the changes to the apartment were due to ordinary use. Any attempt to withhold a security deposit refund because of ordinary use wear and tear is illegal. And if a problem with the unit existed when the tenants moved in, a landlord cannot use the security deposit to fix the issue.

In California, a landlord must return the security deposit to the tenant within 21 days of the day the tenant moves out. If the landlord doesn't return the entire amount, he must, at the same time, give the tenants a document explaining in writing why he is retaining all or part of the deposit.

That document must include:

• An itemized list of each of the deductions.
  
• Copies of receipts and charges for repairs and services for which the deductions were used if the total repair cost was more than $125.
  

What if the landlord has not completed the repairs within the three-week time period? The landlord must send an estimate of the cost of repairs within 21 days of move-out, and then forward the receipts within 14 days of the time they are completed.

Under general California landlord-tenant law found in the Civil Code, the landlord is not required to pay interest on a security deposit, no matter how long a tenant resides in the property. No law prevents a landlord from doing this but there is no legal obligation.

However, in jurisdictions that have enacted rent control laws, some – like San Francisco – mandate that interest be paid. It's important to check with the Rent Board in your city to see what your rights/obligations are concerning security deposit interest.

​Read More:​ California Security Deposit Returns: What Tenants Can Expect