As a landlord in California, you have a right to charge your tenants a security deposit prior to renting the property to them. However, you'll have to abide by the state’s security deposit laws. The statewide security deposit laws define important details including the limit, what a deposit can be used for, and when to return it back to the tenant.
In this article, we’ll take you from A to Z of the basics of California's security deposit laws. Having a basic understanding of these laws can help you avoid many legal issues with your tenants, and is one of the key steps to becoming a great landlord.
An Overview of California's Security Deposit Laws
Is there a limit to how big of a security deposit a landlord can charge a tenant?
Yes, there is a limit. The limit depends on whether the unit you’re renting out is furnished or not. If a unit is furnished, a landlord is prohibited from charging more than 3 times the monthly rent. For instance, if the monthly rent for your furnished property is $1,000, then you wouldn't be able to charge any more than $3,000 as a security deposit.
For unfurnished units, the maximum you can ask as security deposit is equivalent to 2 months’ rent. For example, continuing with the above example, you aren't allowed to charge more than $2,000 for a security deposit.
Can a landlord charge a non-refundable security deposit in the state of California?
No. In California, it’s illegal for landlords to require non-refundable deposits. All deposits are deemed to be the tenant’s property, and a landlord must refund them either in full or in part once the tenant moves out.
How should a landlord store a tenant’s security deposit?
California landlords have a responsibility to store a tenant’s security deposit during the entire tenancy period. What the statewide security deposit law does not specify is where a landlord should store the deposit.
This differs from the regulations in other states. For example, in New Hampshire a security deposit it required to accrue interest. In Iowa, it's necessary for a security deposit to be placed in a separate bank account. In California, however, it's only required that the deposit is returned if the stated conditions are met.
Do landlords need to provide their tenants with a receipt of the security deposit?
No, this isn’t mandatory. Landlords don’t have to provide their tenants with a receipt after collecting their deposit. However, even though it isn't required by the law, many landlords will still provide their tenants with a written proof of the deposit amount as a gesture of transparency and openness.
What are some of the reasons that can make a landlord retain part or whole of the tenant’s security deposit?
As a landlord in California, you can retain part or whole of the tenant’s security deposit for a myriad of reasons. Some of these reasons include:
- To cover unpaid utilities
- To cover excessive cleaning costs upon a tenant moving out
- To cover property damage exceeding normal wear and tear
- To cover lost rental income, for instance, when a tenant breaks their lease or abandons the property
On the other hand, you cannot charge a tenant for property damage that existed before they began renting your property. With that in mind, always carry out a move-in inspection with your tenant so as to avoid issues later on.
You cannot make deductions to your tenant’s deposit to cover for ordinary wear and tear. Examples of excessive property damage include:
- Bent or missing plumbing fixtures
- Chipped or broken sinks
- Missing or cracked bathroom tiles
- Broken windows
- Chipped or gouged wood floors
- Unapproved crayon marking on walls
- Gaping holes in walls from neglect, accidents, or abuse
You're within your rights as a landlord to make appropriate deductions from your tenant’s deposit for excessive damages. However, you cannot charge your tenant for damages that result from the normal use of the property.
Is a walk-through inspection necessary in the state of California?
It is. The purpose of a walk-through inspection is to help a landlord ascertain the condition of their property and to give the tenant adequate time to fix any potential issues. During a walk-through inspection, a landlord should:
- Notify the tenant in writing about their intent to make inspections of the property before the tenant vacates.
Tenants don’t necessarily have to agree to an inspection. If they do, the inspection must be completed no earlier than 2 weeks before the end of the tenancy.
- Notify the tenant 2 days prior to the inspection.
In the notice, the landlord must state the date and time of the inspection, unless both parties agree, through writing, that notice isn’t necessary. These days, with so many people working from home, renters will want to know when you're planning to enter their units so they won't be caught off guard.
If excessive damages exist, the landlord must prepare an itemized list of the deductions.
When must landlords return a tenant’s security deposit after a tenant moves out?
A landlord in the state of California must return a tenant’s security deposit within 21 days of a tenant moving out. The deposit return may be whole or partial. If partial, you must include an itemized list of deductions alongside the deposit.
What happens if the property changes hands?
If the property changes hands, the outgoing landlord has two options.
The first option is to transfer the entire or remaining portion of a tenant’s deposit to the incoming landlord. In this situation, the tenant must also be notified in writing about this transfer.
The second option is to return part or whole of the tenant’s deposit back to the tenant. In this circ*mstance, the incoming landlord must be made aware of the situation in writing.
The Bottom Line
Learning and enforcing proper security deposit policies is one of the keys to keeping the headaches out of managing your rental property, and encouraging a lower turnover rate and higher tenant happiness.
Do you have any questions about how to handle these nuanced security deposit issues? If so, Authority Property Management can help. We are a professional property management company in Redding, CA. Our top-priority is building trust and creating a long-term relationship with tenants and property owners alike.
