No law in California requires a landlord to collect a security deposit. That being said, landlords do have the right to require it from their tenants before lease signing. That’s because security deposits offer protection against a myriad of potential liabilities.
If a tenant, for instance, fails to pay rent, you may be able to use part or all of their deposit to cover your losses. Another scenario is in case the tenant causes negligent property damage, such as breaks a window or a door.
That said, California landlords must handle their tenant’s security deposits in accordance with the statewide law. The following is everything you need to know about California’s security deposit law.
Are there limits to how much you can collect from your California tenant?
Yes! How much to charge your tenants depends on whether a unit is furnished or not. If it’s furnished, then the maximum you can ask your tenant should be equivalent to 3 months’ rent. And if unfurnished, then you can charge them the equivalent of 2 months’ rent.
Exceptions to those rules, however, do exist. One exception is if the tenant is a service member. In such cases, you must lower the security deposit by one month for either a furnished or an unfurnished rental.
Can you charge tenants a non-refundable security deposit?
In California, all security deposits are refundable at the end of the lease term. As such, charging your tenant a non-refundable deposit is unlawful. Whether pet fees or cleaning fees, all tenants’ deposits are refundable when the lease term expires.
How must you store your tenant’s security deposit?
In some states, landlords are required to store their tenant’s deposits in a certain manner. For instance, in Florida, landlords must store their tenants’ deposits in one of three ways. They must store it in either an interest-bearing account, a normal account, or post it as a surety bond.
Does California have similar requirements? Not at all! You are under no obligation to store your tenant’s deposit in a particular way.
What can you deduct from a tenants’ security deposits?
The return of security deposits is a common source of conflict between tenants and landlords. To minimize issues as a landlord, always follow proper procedures when it comes to handling and returning a tenant’s deposit.
The following are instances where you may be able to make deductions to a tenant’s deposit:
- Breaking the lease agreement. There are several potential consequences on a tenant when they break a lease early. And among them is the risk of losing part or all of their security deposit.
- Unpaid utilities. You can use your tenant’s deposit to cover any unpaid utilities once they move out.
- Unpaid rent. You can make deductions to a tenant’s deposit if they move out without clearing their rent.
- Unreasonable messes. Most leases require tenants to leave their rental premises in a good state. If your tenant leaves a big mess, you may have a right to deduct part or all of their deposit. This should help cover the costs of bringing the unit back to the same level of cleanliness it was in when the tenancy started.
- Major property damage. Landlords expect their tenants to leave their rental premises in the same condition they found it, minus normal wear and tear.
Do California tenants have a right to an initial inspection?
Yes, California tenants have a right to an initial inspection. This inspection allows a tenant to see what damages they have inflicted on their property and gives them time to fix them before moving out.
This helps minimize any deductions that may be due on their security deposits.
When planning to have it, you must notify your tenant well in advance. Specifically, you must do so 2 weeks before the lease expires. Your tenant can choose to waive their right to have the inspection, though.
But if they choose to appear, then you must provide them with an itemized list of deductions if there are any damages present. The damages must exceed normal wear and tear. For example, missing fixtures, broken windows, holes in the wall, broken tiles, and pet damage.
It’ll then be upon the tenant to choose whether to fix the issues before the lease expires or not.
When should you return your tenants’ security deposits?
Once a tenant moves out, you have 21 calendar days to return all or part of their deposit. If you have made any deductions, then you must send the remaining deposit with the itemized list of deductions.
What happens if the property changes hands?
You have two options if you choose to sell your rental property. One option is to transfer the deposit, or whatever is left of it, to the incoming owner. The other option is to return the deposit to the tenant, minus any allowable deductions.
It’s important as a landlord that you have a solid grasp of California security deposit law to protect yourself and your property. You should also stay informed on the landlord-tenant laws, the legal eviction process, lease laws, and more.
If this seems overwhelming, consider hiring the services of a qualified property management company like Home Choice Property Management. Their team of experts will assist you in all aspects of property management including helping you stay up-to-date on any changes in legislation!
Disclaimer: This blog isn’t a substitute for professional legal advice. Laws change and this post may not be updated at the time of your reading. If you have questions, kindly consider hiring a qualified attorney or an experienced property management company.