Understanding California Security Deposit Laws: What Landlords & Tenants Need to Know

Security deposits are a crucial part of any rental agreement, protecting landlords from potential damages and ensuring tenants take good care of the property. But in California, there are strict laws governing how security deposits can be collected, used, and returned. Whether you’re a landlord or a tenant, knowing your rights under California Civil Code §1950.5 can help avoid disputes and ensure a smooth rental experience.

How Much Can a Landlord Charge for a Security Deposit?

Starting July 1, 2024, new limits apply to security deposits in California:

• Most landlords can charge no more than one month’s rent as a security deposit.
• Small landlords (who own no more than two properties with four or fewer rental units) can charge up to two months’ rent.

This change ensures that tenants aren’t overburdened with upfront costs while still allowing landlords to protect their properties.

What Can the Security Deposit Be Used For?

Landlords cannot use the security deposit for just anything. According to California Civil Code §1950.5, a security deposit can only be used for:

• Unpaid rent
• Repairing damages beyond normal wear and tear, caused by the tenant
• Cleaning the unit to return it to the condition it was in at move-in
• Replacing lost keys or personal property if specified in the lease

Returning the Security Deposit

Once a tenant moves out, the landlord must return the security deposit within 21 days. If deductions are made, the landlord must provide:

• An itemized list explaining each deduction
• Receipts for any repair or cleaning costs exceeding $125
• If repairs are not complete within 21 days, the landlord must provide an estimate and send final receipts once work is done

Pre-Move-Out Inspection: A Win-Win for Everyone

Tenants have the right to request a pre-move-out inspection, which allows them to fix any issues before moving out and avoid deductions. The landlord must provide at least 48 hours’ notice before conducting this inspection.

Does the Security Deposit Earn Interest?

Unlike some states, California does not require landlords to pay interest on security deposits statewide. However, some cities (like San Francisco, Los Angeles, and Berkeley) have local ordinances that require interest payments on deposits. Check your local laws!

New Requirement: Photographing Rental Units

Effective January 1, 2025, landlords must take photographs of the rental unit:

• Before a tenant moves in to document the property’s condition.
• After a tenant moves out to justify any deductions from the security deposit.

This helps prevent disputes over damages and ensures transparency in the return process.

What Happens If a Landlord Wrongfully Withholds a Deposit?

If a tenant believes a landlord unfairly kept part or all of their security deposit, they can:

1. Request a written explanation from the landlord.
2. File a dispute in small claims court (up to $10,000).
3. If the court finds the landlord acted in bad faith, they may have to pay the tenant up to twice the amount of the security deposit in damages!

Final Thoughts: Keep It Fair and Legal

Security deposits should be a fair and transparent part of any rental agreement. Landlords should clearly outline expectations, while tenants should understand their rights and responsibilities. Clear communication and documentation can help avoid conflicts and ensure both parties are treated fairly under California law.

Need help managing your rental properties or handling security deposits? Initial Property Management specializes in property management solutions to keep your rental business compliant and stress-free!