Everything you need to know about California security deposits explained here.
Leasing a house or an apartment involves signing a lease agreement (contract) filled with confusing legal jargon. Thankfully, websites exist to help you understand the “renter’s lingo”.
But, security deposits deserve special attention. U.S. laws do not require landlords to collect a security deposit. Source
Yet, most landlords do. That’s because a security deposit provides you with insurance in case your tenant skips owing rent or damaged appliances or furniture.
That’s why understanding a security deposit becomes vital for you.
Let’s explore the different aspects of a security deposit.
What’s a Security Deposit?
Wikipedia provides the simplest explanation of a security deposit. A sum of money held in trust to protect the property owner from a tenant defaulting on the rental agreement.
Thus, if your tenant skips out and breaks the lease, those funds help you to recover some or all the loss.
Bear in mind, that every state and many municipalities enacted their own laws on the rights of landlords and tenants about security deposits.
Also, every state law requires limits about how much a landlord asks as a security deposit. View a chart of all 50 states. Here
In addition, the amount you ask for a security deposit may depend on your tenant’s Credit Score. That’s right, a low credit score means a higher risk tenant which should make you raise your security deposit. Check out this post explaining credit scores. Here
Security Deposits Differ from Extra Fees
Know the difference between security deposits and moving in fees.
These fees may include a “pet fee” if your tenant intends to live with a pet.
An “application processing” fee pays for background and credit checks you conduct before approving the tenant.
The Difference between a Security Deposit and Last Month’s Rent
Leases stating that the deposit amounts to your tenant’s last month’s rent only applies to the unpaid rent. It’s not a security deposit for damages. If your tenant owes rent when leaving this last month’s rent deposit automatically goes to you.
California law doesn’t allow tenants to use a security deposit as payment for the last month’s rent. But, if the lease agreement states the tenant paid first and last month’s rent and a security deposit, your tenant doesn’t need to pay the last month’s rent.
California Security Deposit Laws
Everything you need to know about California security deposit laws.
The California Security Deposit Laws require specific steps a landlord must take to guard security deposits. California Code – Section 1950.5 states that for residential properties:
Security Deposit Limits Exist
- Furnished residences allow landlords to charge up to 3 times the rent; and
- Unfurnished residential property allows the landlord to charge up to twice the rent.
Thus, if your monthly rent amounts to $1,000 you can charge up to $2,000 initial security deposit on your unfurnished home or apartment.
Or, if you rent a furnished home or apartment you may require a security deposit up to $3,000.
It’s up to you to choose how much security deposit to ask for up to these limits.
Returning the Security Deposit
When the tenancy expires, California law allows you up to 21 days to return your tenant’s security deposit fully. If you fail to return the full amount you must give your tenant (or mail to his or her last known address) either:
- A written letter explaining the withholding of which parts of the deposit; and
- An itemized list of every deduction; and
- A refund of all remaining deposit; and
- Copies of every receipt for the deductions, unless the repairs cost less than $126, or your tenant waived the right to require the receipts.
Deductions from the Security Deposit
California laws allow these types of landlord deductions from the security deposit:
- The costs for fixing property damages your tenant or guests caused, not including normal wear and tear;
- Cleaning costs after your tenant leaves the property to make the property as clean as when your tenant first moved in; and
- Unpaid rent.
Disputes about Security Deposits
If you fail to return the security deposit within 21 days from your tenant’s move-out or your tenant disagrees with any deductions. Your tenant must send you a letter by certified mail with the return receipt requested.
After waiting for 10 days and you do not reply, your tenant must file a claim with the Small Claims Court. California law allows your tenant to sue for your un-refunded security deposit plus two times that amount.
- If your tenant disputes your deductions he or she can sue you in smalls claims court if the disputed amount is $10,000 or less; or
- You and your tenant agree to use a mediation program to resolve your dispute out of court.
The Security Deposit May Require You to Pay Interest in Some California Cities
California laws do not require you to pay interest to your tenant earned with the security deposit.
Yet, 15 rent control cities require landlords to pay interest on security deposits to their tenants. But, only three of them specify the interest rate:
- Los Angeles;
- San Francisco; and
- West Hollywood.
Keeping the Security Deposit
No matter what state you live in, take the following steps to protect the security deposit to pay for damages or lost rent:
Take lots of photos – Take tenant moving in and moving out photos to show the condition of the property during those critical times. A photo is worth a thousand words. A video works too! Photos and videos showing the property in worst condition as when your tenant moved in help to use all or part of the deposit to fix the damage.
Make your tenant sign an inventory – Make two original lists of all included items like appliances, furniture, and fixtures. Include notes about their condition. You and your tenant sign and date both original lists. Keep your original form when the tenant moves out.
Conclusion
Everything you need to know about California security deposits explains:
- What’s a Security Deposit?;
- Security Deposits Differ from Extra Fees;
- The Difference between a Security Deposit and Last Month’s Rent;
- California Security Deposit Laws;
- Security Deposit Limits;
- Returning the Security Deposit;
- Deductions from Your Security Deposit;
- Disputes about Security Deposits;
- The Security Deposit May Require You to Pay Interest in Some California Cities; and
- Keeping the Security Deposit.
Want to Avoid the Hassle of Security Deposits?
Contact Us if you need professional property management services for your rental properties like apartment buildings, rental houses, duplexes or triplexes. We serve the greater San Diego area.
Steven Rich, MBA – Guest Blogger
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