Security Deposit Issues in California

Issues and disputes regarding the tenant’s security deposit are very common in California. However, there are specific rules that govern the amount of deposits and the procedure for withholding and using deposits. Landlords and tenants should pay close attention and follow the procedures (below) so they can avoid disputes regarding the security deposit before the tenancy ends and the tenant moves out.

Under California law, a residential lease agreement cannot say that the security deposit is non-refundable. If a residential lease agreement contains that language, it is void and will not hold up in court. When the tenant moves out, the landlord must return the security deposit to the tenant, unless the landlord properly withholds and uses the deposit according to California law. Under the law a landlord is allowed to withhold and use a tenant’s security deposit for 4 purposes:

  1. For unpaid rent
  2. For cleaning the rental property when the tenant moves out (as clean as it was when the tenant first moved in)
  3. For repair of damages caused by the tenant or the tenant’s guests (not including normal wear and tear)
  4. If provided in the lease agreement, for the cost of restoring or replacing furniture or other items (such as keys)

Amount of Security Deposit

California law also limits the amount of the security deposit that the landlord can charge(on top of the first month’s rent). The amount depends on if the rental property is unfurnished or furnished.

  • Unfurnished Rentals: The total amount of the security deposit cannot be more than the amount of 2 months’ rent.
  • Furnished Rentals: The total amount of the security deposit cannot be more than the amount of 3 months’ rent.

When a tenant wants to move out and gives a 30-days written notice to vacate, he/she should:

  • Date the notice
  • State the date that he/she is intending on moving out
  • State the mailing address where he/she wants security deposit sent to
  • Sign the notice and keep a copy
  • Personally give the notice to the landlord or property manager, or alternatively send it by certified or registered mail with return receipt requested

Procedure of Refunding or Withholding a Security Deposit

California law has specific procedures that the landlord must follow for withholding, using, and returning the security deposit. Within 21 calendar days after the tenant has moved out, the landlord must either:

  • Send the tenant a full refund of the security deposit

                OR

  • Mail or personally deliver to the tenant an itemized statement that lists any deductions from the security deposit and the reasons for the deductions, along with a refund of any amounts not used

If the landlord does not send the tenant a full refund of the security deposit, and/or does not give the tenant an itemized statement of the deductions within 21 days, the landlord loses the right to keep any of the security deposit and must return the entire deposit. However, the landlord’s claims for damages (for unpaid rent, repairs and cleaning) are not forfeited, as the landlord may still later sue the tenant for them, if the landlord proves that the claimed damages and if the claimed amount is reasonable. If a landlord in California intentionally withholds the security deposit in “bad faith,” the landlord could be liable for the tenant’s actual damages and for statutory damages of up to two times the amount of the security deposit.

Avoiding Problems with the Security Deposit

If a tenant in California wants to avoid potential problems with the refund of the security deposit, it is important that he/she should requests an initial inspection of the rental property before moving out (the inspection cannot be earlier than 2 weeks before the moves out date). However, the landlord cannot do an initial inspection if the tenant does not ask for one. The tenant does not have the right to request an initial inspection if he/she has been served with a 3-day notice to quit (for non-payment of rent, material damage to the property, nuisance, etc.). The purpose of the initial inspection is to give the tenant a chance to repair any damages before moving out. If the tenant requests an initial inspection, the landlord must inspect the rental property before the final inspection, and provide the tenant with an itemized list of potential deductions from the security deposit.The tenant also has a right to be present during the initial inspection, and has time up until moving out to make any necessary repairs and avoid deductions form the security deposit. After the tenant has moved out, the landlord or property manager could perform a final inspection of the rental property. The landlord can then deduct money from the security deposit:

  1. To repair damages that were identified in the initial inspection but were not repaired
  1. For damages that occurred after the initial inspection
  1. For damages that were not identified in the initial inspection because of the tenant’s personal belongings (furniture, etc.).

Either way, the landlord has 21 days after the tenant has moved out to give the tenant a full refund of the security deposit or an itemized list of all deductions made.