Security deposit issues often cause controversy between landlords and tenants. In California, state law sets out a substantial framework for these deposits. Taking the time to learn and understand California security deposit laws before a tenancy begins can prevent problems down the road.
What Is a Security Deposit?
When a tenant applies to rent a dwelling unit, the amount she must give the landlord is usually more than just the first month's rent. Most California landlords seek additional funds from the tenant at move-in, moneys that the landlord holds as security in case the tenant damages the unit, leaves it in a condition much worse than when she took possession, or fails to keep up with the rent payments.
These deposit moneys are given a variety of different names by landlords, such as key deposit, damage deposit, general security deposit or pet deposit. But if the landlord seeks money upfront from a tenant for anything other than the current month's rent, it is considered part of the security deposit in California.
Why Does a Landlord Require a Security Deposit?
A landlord may never have to use a security deposit, and it is better for both parties if that is the case. The tenant may keep the rent current, give appropriate notice when terminating the tenancy and return the premises in the same shape it was in when she moved in. Or, she may have damaged the unit, but paid for its repair.
But a landlord cannot count on this being the case. Some tenants will not be responsible and will skip out without repairing damage or making up unpaid rent. A landlord may have to expend a good deal of money to recover payment for those damages in a court action. Rather than taking that risk, the landlord imposes a security deposit.
Does California Cap the Amount?
California law does limit the amount of a security deposit. The proper amount permitted should not be an issue between a landlord and a tenant since it is set out in the codes. California law sets out a clear, easily calculated formula for determining the legal cap for a residential security deposit. Under Civil Code Section 1950.5, the cap is set at a multiple of the rental amount: The maximum amount for a security deposit on an unfurnished unit is twice the monthly rent; for a furnished unit, it is three times the rent.
As of January 1, 2020, the law lowers the cap on security deposits in California for tenants that are in the armed services. Landlords can request an amount equal only to one month's rent for unfurnished units; for furnished units, the cap is two month's rent.
Is Last Month's Rent Part of a Security Deposit?
Sometimes a landlord asks a tenant for first and last month's rent. First month's rent is current rent and thus not part of a security deposit. However, the landlord asks for last month's rent as security, not because it is currently due and owing. Under California landlord/tenant law, last month's rent is part of the total security deposit. That means it is included in the cap calculation, together with all other deposits.
For example, if a tenant is moving into an unfurnished apartment with monthly rent set at $1,500, the cap on the security deposit is twice the rent, or $3,000. If a landlord asks for last month's rent of $1,500, plus a pet deposit of $500 and a general security deposit of $2,000, the total amount of $4,000 exceeds the security deposit cap and is not permitted under California security deposit law.
Can a General Security Deposit Be Used for Last Month's Rent?
While last month's rent counts toward the security deposit cap, it is somewhat different from other security deposits. When the tenant decides to leave and gives the landlord his 30-day notice, he doesn't have to pay rent for the final 30 days if he has put down last month's rent.
On the other hand, if, instead of asking for last month's rent, the landlord asks for a general security deposit, the tenant cannot rely on that deposit to pay his final month's rent. He must pay the rent as due, then wait until after the term of the tenancy for the return of his security deposit.
Do Landlords Have to Pay Interest?
Under California state law, landlords do not have to pay tenants interest on their security deposits. However, this is required under some local rent control laws. For example, under Los Angeles' rent control law, landlords must pay tenants annual interest on security deposits. Anyone who lives in a rent-controlled jurisdiction should check for additional or alternative security deposit laws.
Are Nonrefundable Deposits Legal?
Nonrefundable security deposits are more like fees than security. They often show up in the form of nonrefundable moneys that the landlord intends to use for carpet cleaning or lock replacement at the end of the tenancy. However nonrefundable deposits are strictly forbidden under California security deposit laws.
What Can a Landlord Use a Deposit For?
If a landlord classifies a security deposit as a particular type of deposit, it can only be used for that specified purpose. For example, a landlord who seeks a last month's rent deposit cannot appropriate that money and use it for repairing broken windows.
On the other hand, any moneys taken as general security deposits, damage deposits or cleaning deposits can be used by the landlord for unpaid rent, to cover costs of cleaning to bring the apartment to the same level of cleanliness it was on move-in or to repair damage done to the unit by the tenant, her guests or her pets. Note that the landlord cannot use any part of the security deposit to repair ordinary wear and tear to the unit.
What Is Ordinary Wear and Tear?
Living in a dwelling normally leaves traces. For example, when a family lives in an apartment for 10 years, the carpets are likely to be worn, the floor scuffed and the paint faded even if the family is unusually careful. Since the landlord has rented out the unit as a dwelling, he is not entitled to complain about ordinary use.
On the other hand, more extreme damage isn't classified as ordinary wear and tear. For example, deep scratches in the wooden floor or holes bashed into the walls do not result from normal living, and the landlord is justified in charging the tenant for fixing the damage. The boundary between wear and tear and improper damage is not always clear, and, in some cases, a court will have to make the decision.
What Is the Procedure for Return of Security Deposits?
When the tenant vacates the unit, it starts a 21-day period during which the landlord must either return the entire security deposit or explain in writing why he is not returning all of it. If he is keeping all or part of the deposit, he must give the tenant a list of each and every deduction, as well as provide receipts for any charges and deductions over the amount of $126. If the repairs cannot be finished within the three-week period, the landlord must enclose a reasonable estimate of the cost, followed by the receipts when they are completed.