What Tenants Need to Know About California’s Deposit Law


April 26, 2019

Charging a security deposit gives you peace of mind. It also gives you the means to take care of any issues that may arise when a tenant rents your property. It’s a good way to make sure that nothing bad happens to the apartment. While it may be tempting to charge a large amount to keep your investment safe, there is a California security deposit law that prevents you from doing that.

 

California security deposit law

You have the right to charge a renter a security deposit in California, but it must fall within certain parameters. If the unit is unfurnished, you can only charge a maximum of two months’ rent. If the apartment is furnished, you can charge up to three months’ rent. For commercial property, there is no limit on the amount you can charge.

You can’t make the fee non-refundable. However, you don’t have to keep the fee in a separate account. You have to store the money, but there are no specific rules about how to do that. You are not required to pay the tenant interest collected from the fee.

The security deposit can’t be used as the last month’s rent unless specifically designated as such. As the landlord, you may make an agreement with the tenant that the amount can be used in this manner, but you don’t have to. If it has been specified that there are funds used for the security deposit and last month’s rent, you have to use the money according to those definitions.

In California, you don’t have to give tenants written notice after you receive the security deposit. There are several reasons you may keep all or part of the fee, and these include the following:

  1. The tenant has defaulted on rent payments
  2. There is damage to the apartment that goes beyond normal wear and tear
  3. To cover cleaning costs to get the unit to a habitable condition and to what it looked like before this tenant moved in
  4. To cover any future payments that may occur if the tenant violated the lease
  5. Other breaches of the lease that may have occurred

 

Walk-through inspections

As a landlord, you can walk-through the residence with the tenant to point out any issues that will need to be covered using the fee. If the tenant opts to get these fixed before the final inspection, they have that right. Before doing a walk-through inspection, there are some conditions you’ll have to meet.

You must notify the tenant within a reasonable amount of time your intent to inspect the property. This must occur before the tenant moves out so they have the opportunity to make corrections if they so choose.

You are required to give the tenant 48-hours notice, in writing, before the inspection. You must also supply the date and time for the inspection. If both you and the tenant agree, in writing, that notice is not necessary, then you can forgo this step.

The tenant doesn’t have to agree to a walk-through inspection. However, if they do, it should take place no sooner than two weeks before the tenancy ends. After the inspection, you must provide the tenant with a list of all repairs that will need to be fixed before the final inspection.

 

Returning the security deposit

After the tenant moves out, you have 21 days to return their fee. If you don't return the deposit in this amount of time, the tenant has the ability to take you to small claims court. The returned amount could be less than the amount needed to cover repairs or defaulted rent payments. In addition to the funds, you must also supply, in writing, the original amount of money received. You must also itemize any deductions that occurred.

If the work has already been completed for repairs to the property, you must provide the tenant with copies of the actual charges that were incurred. You must provide a good faith estimate of how much it will cost if repairs have not been completed.

The statement must also show how much of the fee is being returned. While you have the ability to charge a fee to protect your property, it must abide by California security deposit law. If you don’t, you open yourself up to lawsuits.

While it’s impossible to account for every type of possible tenant that may move into your property, you may consider partnering with a company like Blueground. They will go through the interview process for you and find the right tenants to rent your property. While they can’t guarantee accidents won’t happen, they can reduce the chances by vetting applications and finding the best tenants. Keep your property safe by getting a security deposit. It will help cover unexpected costs. However, abide by the laws then charging renters this fee.


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