Are California landlords compelled by law to collect a security deposit? No, but most landlords do, and for good reason!
Requiring a tenant to pay a security deposit provides a safety net for landlords should a tenant fail to abide by the terms of the agreement. For example, if the tenant causes damage exceeding normal wear and tear. In such a case, you’d be entitled to make an appropriate deduction to a tenant’s security deposit.
That being said, there are rules that you must follow when collecting a tenant’s security deposit. In California, here’s everything you need to know in this regard!
What Is the Security Deposit Limit in the State of California?
Some states put limits on how much landlords should charge their tenants for their security deposit, and California isn’t an exception.
How much to charge tenants depends on whether a unit is furnished or not. If it’s furnished, you can charge your tenant up to three months’ worth of rent for the security deposit. So, if you’re charging tenants $1,500 in monthly rent, then the maximum you can charge is $4,500.
If the unit you’re renting out is not furnished, then the most you can charge for a security deposit is the rent of 2 months. So, with a monthly rent of $1,500, the maximum you can ask for is $3,000.
Some exceptions do exist, however. The first one is if the tenant is a servicemember. In that case, you must lower their deposit to the equivalent of one month’s rent. Servicemembers include members of the armed forces, activated National Guard, and commissioned corps of the Oceanic and Atmospheric Administration.
Are Non-Refundable Security Deposits Allowed in California?
No. As a landlord in California, it’s unlawful to charge tenants non-refundable security deposits. You must refund all deposits to the tenant at the end of their lease term, minus any reasonable deductions.
Do Landlords Have to Store Their Tenants Deposits in a Particular Manner?
In California, no special requirements exist for how a landlord must store security deposits.
What Allowable Deductions Can You Make on a Tenant’s Security Deposit?
One source of conflict between landlords and tenants involves the use and return of security deposits.
For instance, a tenant may move out of their rental thinking they have left it in pristine condition, but the landlord may have a different view. The landlord may then go ahead and make appropriate deductions on the tenant’s deposit.
The following are justifiable reasons for making appropriate deductions to a tenant’s security deposit:
- If the tenant breaks their lease early. Tenants can break their lease agreement for a myriad of reasons. For example, this could be due to a job relocation or the need to downsize or upsize. You’ll be able to withhold the appropriate security deposit amount for reasons that aren’t legally justified
- If the tenant moves out without clearing their utility bills. Tenants must clear their utility bills upon moving out. If they don’t, you may use part or all of their deposit for that purpose
- If the tenant fails to make their rent payments. One key responsibility tenants have when they sign the lease is the payment of rent. If they don’t, you may minimize your losses by making the appropriate deductions from their deposit
- If the tenant leaves their unit dirty and unsanitary. Most lease agreements require that tenants return their units in the same condition they found them, other than normal wear and tear. If a tenant doesn’t, you can use part or all of their deposit to clean it
- If the tenant causes excessive property damage. A tenant is responsible for all damage exceeding normal wear and tear
Is a Walk-Through Inspection Necessary in the State of California?
Yes. Walk-through inspections are required in California. The inspection helps both parties document the condition of the property relative to when the tenant was moving in. The goal of the inspection is to give the tenant time to fix any issues before they move out.
A walk-through inspection must be held 2 weeks before the expiry of the lease agreement. You have a responsibility as a landlord to notify your tenant beforehand. Your tenant has a right to waive it if they so choose.
But, if they choose to appear, then you must provide them an itemized list of deductions for any damages found.
How Much Time Does the Landlord Have to Return the Deposit After a Tenant Moves Out?
Once a tenant moves out, you’ll have 21 calendar days to return the deposit back to them, other than any appropriate deductions.
If you’ve made any deductions to the deposit, you must inform them of the reason by sending them an itemized list on a written notice. You must deliver the notice via either first-class mail or personally.
If the tenant didn’t provide a forwarding address, then you must mail the written notice to the vacated unit’s address.
Wrongfully withholding a tenant’s security deposit can bring penalties, including being liable for paying the tenant up to 2x the withheld amount.
What Must You Do If Property Ownership Changes Hands?
You’ll have two options if this happens: transfer the deposit to the new landlord or return the deposit back to the tenant
Bottom Line
Knowing how to handle your tenants’ security deposits is a key aspect of being a landlord. You’ll both protect your investment property while also avoiding any legal conflicts that could arise.
If you need help with security deposits or any other aspect of California’s landlord-tenant laws, contact Conrad Property Management, Inc. today! Our property management services are some of the best in the industry. We’d be pleased to speak to you about how we can help your investment moving forward.
Disclaimer: This article is only meant to be informative and is not a substitute for expert legal advice. If you have a specific question or need further help, please consider hiring a qualified attorney or an experienced property management company like us directly.
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