Key Takeaways
- Ensure your security deposit amounts, deductions, and return timelines strictly comply with California law to avoid penalties and disputes.
- California generally caps security deposits at one month’s rent, with limited exceptions for small landlords, waterbeds, and certain administrative costs.
- Landlords must return security deposits within 21 days of move-out and may only deduct for unpaid rent, utilities, and damages beyond normal wear and tear.
One recipe for successful landlording in California is requiring security deposits from first-time residents. The security deposit can help cushion you against various potential losses that can arise from tenants who violate the lease agreement.
An example of such a scenario is when a resident abandons their rented premises. This can cost you in lost rent payments still due under the lease. Luckily, if you’re holding the resident’s security deposit, you can use all or a portion of it to compensate yourself.
Requiring security deposits from residents, however, comes with certain responsibilities. You must abide by the state’s limit, and return it within the required timeframe, among meeting other requirements. The following is a guide by Jackson Property Management on the important basics of the California security deposit law.
Maximum Security Deposit Limit
California law limits how much a landlord can charge a resident. In most cases, the limit is capped at one month’s rent.
You can, however, require up to two months’ rent if certain conditions are met. That is, if you own no more than two rental buildings that have a total of four rental units. Also, you must be the sole proprietor of the rentals, or operate them through an LLC.
If a resident has a waterbed, you can charge them 1.5 times the monthly rent. You can also charge them a reasonable fee for administrative costs.
Additional Pet Deposits
Under California security deposit law, landlords can require residents with pets to pay a damage deposit. In order to make deductions, the damages must exceed normal wear and tear. For example, chewed-up baseboards, staining on carpets, scratches on hardwood floors, or damage to landscaping.
The total deposit must, however, not exceed the state’s limit.
When charging a pet deposit, you must exempt residents with service dogs or emotional support animals. Why? Because, disability is a protected class under the Federal Fair Housing Act.
Security Deposit Holdings
Just like the neighboring states of Oregon, Nevada, and Arizona, there are no specific rules in California on holding residents’ security deposits. You don’t have to keep it separate from your own funds. Neither are you required to store it in an interest-bearing account.
Be that as it may, some cities in California may have special requirements, like Los Angeles. Here, landlords must store their residents’ security deposits in interest-bearing accounts. Especially, if the property is covered by the city’s Rent Stabilization Ordinance (RSO).
Other cities with a similar requirement include Berkeley, San Francisco, and Santa Cruz.
Sale of Rental Property
As a landlord, you must meet certain requirements if you sell an occupied rental property. You’ll have two options to consider. One option would be to transfer the deposit to the incoming landlord, less any allowable deductions. If there are deductions, you must provide the new landlord with an itemized statement.
The other would be to return the deposit, or whatever portion remains, to the resident.
Security Deposit Deductions
You can only make certain deductions from a resident’s security deposit. In California, acceptable security deposit deductions include unpaid rent and utilities, and the cost of fixing rental damage or professional cleaning.
When it comes to rental damage deductions, the damage must exceed normal wear and tear. Examples of damage exceeding normal wear and tear include missing fixtures, holes in the wall, and broken tiles.
The cost of fixing normal wear and tear on a property is the landlord’s. Examples include stained bath fixtures, lightly dirtied grout, and gently worn carpets.
Returning the Security Deposit
Residents in California have a right to an initial inspection before moving out. You must also allow them to fix any damage exceeding normal wear and tear on the unit.
Regardless, after the resident moves out, you must return their deposit, less allowable deductions, no later than 21 days.
If you’ve made deductions, you must provide them with an itemized statement alongside the security deposit portion.
Bottom Line
These are the important basics of the California security deposit law that landlords requiring security deposits must abide by. If you fail to do so, you may suffer harsh penalties. Not to mention the damage it may cause to your reputation.
For expert property management help, look no further than Jackson Property Management. We can handle all your property management worries, from property marketing, to resident screening, to rent collection, and everything in between. Get in touch to learn more!
Please note that the information provided in this blog is intended for general guidance and should not be considered as a replacement for professional legal advice. It is important to be aware that laws pertaining to property management may change, rendering this information outdated by the time you read it.