California Security Deposit Laws

For landlords, collecting a security deposit from tenants provides numerous advantages, acting as a financial safety net to mitigate potential risks associated with leasing property. It helps cover costs such as unpaid rent, property damage beyond normal wear and tear, or excessive cleaning expenses. 

However, navigating California’s security deposit laws can be complex, with strict rules designed to protect both landlords and tenants. At Rent Pros, we understand the importance of staying compliant while safeguarding your investment. 

Recently, California introduced new legislation further limiting the amount landlords can collect as a security deposit. These changes emphasize the need for landlords to stay informed and adapt their practices. Let Rent Pros help you manage these challenges seamlessly.

Benefits of Security Deposits for California Landlords

– Cover Unpaid Utilities: During the lease period, most utilities will be in the tenant’s name. Should they fail to pay, California law allows landlords to deduct unpaid utility costs from the tenant’s security deposit.

– Address Excessive Cleaning Costs: Generally speaking, leases allow tenants to vacate the property in the same state as when they arrived, less natural wear and use. Landlords have the right to deduct excessive cleaning costs if the tenant vacates the property and leaves it in an unclean condition. 

– Recover Lost Rent Payments: Nonpayment of rent constitutes a breach of the rental agreement. California’s security deposit laws allow landlords to recover unpaid rent by using the tenant’s deposit.

– Compensate for Lost Rental Income: Tenants who abandon the property or break their lease early can cause financial losses. Landlords may deduct appropriate amounts from the deposit to recover these losses.

– Repair Excessive Property Damage: Security deposits can cover damages in excess of normal wear and tear on the property. 

California Security Deposit Law: Key Guidelines

California Security Deposit Limit

California law caps the security deposit amount:

– A recent CA law took effect limiting security deposits to one month’s rent for both furnished and unfurnished units. While the former law distinguished between furnished units and unfurnished units, Effective July 1^st, 2024 security deposits will generally be limited to just one month’s rent. The legislation, AB12 by assemblyman Matt Haney, D-San Francisco, was signed into law by Gov. Gavin Newsom October of 2023.

– The law includes an exception for certain small landlords. Property owners with no more than two residential rental properties, collectively including no more than four dwelling units offered for rent, may still collect up to two months rent as a security deposit. 

– To qualify for this exception, the owner must hold the property as a natural person, a limited liability company (in which all members are natural persons), or as a family trust. 

Nonrefundable Fees

California law prohibits landlords from charging nonrefundable fees, ensuring fairness in rental agreements. Any fees collected must be refundable or deducted from the security deposit with proper itemization. This rule promotes transparency and protects tenants from unfair financial practices.

Storing a Tenant’s Deposit in California

In California, landlords are generally not required to store tenant security deposits in a separate account or pay interest on them. However, local ordinances in certain cities may impose specific requirements, such as holding deposits in interest-bearing accounts. Landlords should check local regulations to ensure compliance.

Reasons to Withhold a Tenant’s Security Deposit in California

Landlords may deduct from a security deposit for the following reasons:

– Unpaid rent or utilities.

– Excessive cleaning costs.

– Repairs for tenant-caused damage beyond normal wear and tear.

– Replacement of lost keys or other rental items.

A Walk-Through Inspection

California law allows tenants to request a pre-move-out inspection at a reasonable time but no earlier than two weeks before vacating. This inspection provides tenants and landlords with an opportunity to address potential deductions, fostering better landlord-tenant relations.

Security Deposit Refund in California

Landlords must return the remaining deposit within 21 days of the tenant’s move-out date. If deductions are made, an itemized statement along with receipts or invoices must be provided.

Change in Property Ownership

When a property is sold, the new owner inherits responsibility for the tenant’s security deposit. 

Conclusion

California’s laws are crafted to balance the interests of landlords and tenants, ensuring fairness and accountability on both sides. These regulations enable landlords to safeguard their investments, recover costs for damages, and address unpaid rent, while tenants benefit from clear protections against unfair deductions. 

By staying informed and compliant, landlords can avoid legal risks and foster positive, long-term tenant relationships. At Rent Pros, we specialize in helping landlords navigate California’s complex property laws, ensuring compliance while maximizing the value of their rental properties.

If you have questions about security deposits or need assistance with any aspect of property management, don’t hesitate to contact Rent Pros today. Our dedicated team is here to make property management effortless.

Disclamer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws frequently change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.

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