What is a Security Deposit?
A security deposit is an advance payment to the landlord or property manager to cover expenses as they may occur when a tenant moves out and a new tenant moves into a house or apartment. CA land owner must declare the entire amount of the security deposit in the rent agreement.
Why are Security Deposits collected by landlords & property managers?
Security deposits typically protect the landlord or property manager. There is risk involved with renting property out to a stranger. The security deposit works to protect against potential damages and/or unpaid rent. In the event that a tenant causes damage to a rented property, who pays for that? What if rent payments are missing? What if a tenant vacates suddenly? These are all risks that the landlord takes on, therefore are within their rights to charge the security deposit to mitigate some risk.
However, there are limits to how much a security deposit can be charged and how they must be calculated.
How are Security Deposits calculated?
According to CA law, a tenant’s security deposit may not exceed the amount of two month’s rent if the residence is being rented unfurnished.
If the unit is being rented furnished, it is allowable for the security deposit to equal three month’s rent.
What is a Common Security Deposit?
In common practice, the security deposit amount tends to equal one month’s rent. You may see variations including the final month’s rent + deposit, last month’s rent, or an amount as low as $1,000. Generally, larger security deposits are not as common, and most security deposits are equal to one month’s rent.
This variability exists between how landlords and property managers enforce their lease agreements, and whether or not the property being rented is a single-family home or a unit in an apartment complex. Some property managers may not consider prospective tenants if they cannot cover the first and last month’s rent and a deposit, other landlords are willing to be flexible and may even offer tenants payment options to fulfill deposit requirements.
When must the Security Deposit be Returned to The tenant?
There are some legal circumstances in which a landlord can withhold some or all of the deposit, which will be covered later in this article. Aside from those circumstances, the deposit must be returned within 21 days. In scenarios where the landlord is to withhold a portion or the entire deposit, the landlord must mail or personally give the tenant the following items:
- A written letter explaining why the landlord is withholding the deposit amount
- A detailed itemized list of each deduction
- The remaining refund of the tenant’s deposit if withholding a portion less than the total amount
- Copies of receipts for each charge and/or deduction.
- The landlord may exclude this final item if the repairs cost less than $126 or the tenant(s) waived their right to get receipts.
- If the repairs exceed 21 days to be completed, the landlord can send a good faith estimate of the cost of repairs to the tenant(s). Once the repairs are complete, the landlord must send receipts to the tenant(s).
After the Tenant Moves, Security Deposits can be Used to Cover the Final Month’s Rent
If the security deposit, as stated in the rental agreement, was for the last month’s rent, it must be applied toward the unpaid rent, and the remainder of the rent portion of the deposit returned to the tenant within two weeks. The full determination of damages and other deductions charged to the tenant against the security deposit must be explained by the landlord, and the refund submitted to the tenant by the time agreed upon in the lease or rental agreement or within 21 days after the tenant returns the property to you. If the refund is not returned to the tenant within 21 days the landlord may be subject to a fine of up to $200 plus additional damages.
When can a Security Deposit be withheld?
The security deposit can be withheld under very specific circumstances under CA law. The security deposit serves to protect the landlord if the tenant breaks or violates the terms of the lease or rental agreement. The landlord may use the security deposit to cover damage to the rental property, significant wear, and tear on the property, cleaning, key replacement, or back rent. This does not include reasonable use.
A landlord or property manager may deduct from security deposits the cost of fixing any damages to the property caused by the tenant or their guests. However, ordinary wear and tear is not an acceptable reason to withhold money from the deposit, under the law.
Early Termination of Rental Agreement
In the event that a renter vacates a home or apartment without written approval, that renter is responsible for paying rent money owed either until the end of the agreement or until the landlord is able to rent the unit out again.
Under circumstances where renters fail to make rent, the landlord is entitled to withhold funds from security deposits to recover money owed.
Vacating Unit Significantly Dirty
A landlord is entitled to withhold money from deposits if the unit is significantly dirty. It is in the best interest of the landlord and property manager to make sure that rentals are in presentable condition when transitioning to a new renter. They have a responsibility to the owner and the future tenants to make sure the home is safe and clean. If previous tenants leave the home dirtier than when they started their lease, the cost to clean and sanitize the home falls on them.
When is it Unacceptable to Withhold the Deposit?
It is not acceptable, according to state laws, for a security deposit to be withheld for ordinary and reasonable use. It is illegal to withhold funds from the security deposit for new carpets, curtains, trimmings, furniture, and interior or exterior painting for a home or apartment unless there is damage beyond what is ordinary and reasonable wear and tear. Landlords may also not deduct from deposits to repair issues that existed prior to when the tenants moved in.
If the tenant moves from the rental unit and the security deposit is unlawfully retained, the tenant can sue the landlord or property manager in small claims court.
Does any portion of a Security Deposit qualify as Nonrefundable?
No portion of a security deposit may be delineated as “non-refundable” in the terms of a rental agreement for a home or apartment. The security deposit serves to cover damage and actual expenses to return the rented property to a tenable condition and to pay rent the landlord has not collected.
What if the Rental is Sold During an Active Lease?
Homes and apartments are sometimes sold in the middle of leases. In the event this occurs, the landlord must transfer the security deposit to the incoming owner. The new owner cannot charge a higher security deposit or monthly rent until the end of the lease. Once the lease is over, the new owner is responsible for refunding the security deposit. If the departing owner fails to transfer the deposit over to the incoming owner, the tenants have cause to sue the prior owner to get the deposit returned.
Security Deposit Disputes
State laws are clear on the matter of security deposit disputes. In the event that a landlord returns less than the entire amount of the security deposit, a tenant can draft a letter to the landlord explaining why they deserve a larger refund. This can demand that the money already paid in the deposit must be paid back and that the owner must pay it back right away. The property owner would then be required to pay it back.
Security Deposit Violation Remedies
Disputes involving security deposits that go unresolved can warrant a lawsuit being filed by the tenant against the landlord in small claims court, as long as the total amount being sued for is up to $10,000. The tenant is entitled to sue for:
- Payment of the full security deposit, plus
- Damages totaling twice the amount of the security deposit.
If the landlord was acting in bad faith, the judge may order the landlord to pay additional damages to the renter.
Landlord-Tenant Security Deposit: How to Protect Yourself and Avoid Legal Issues
In the interest of a smooth landlord-tenant security deposit process, there are steps most landlords and renters can take to protect themselves and avoid legal issues.
- Make sure that the rental agreements clearly state the terms of the security deposit according to local laws
- An in-person walkthrough should be conducted with a written record of the condition of the home or apartment.
- It’s in the best interest of both parties to take pictures when the renter moves in and for the renters to return the rental unit to the same condition
- Pay rent on time and be reasonable with deductions.
- Give the landlord at least 30 days’ notice in writing in the event that the renter is ready to move out.
- Make sure each additional person or roommate is accounted for in the lease.
In most cases, renters and landlords are pretty reasonable. Property ownership is a great investment and a responsibility. Keep an open line of communication and disputes can be handled before they arise. In cases where a legal issue arises, contact a landlord-tenant attorney.
What are Some Example Security Deposits?
Some sample security deposits are for one month’s rent, the first month’s rent, two month’s rent, or a lease which indicates that the security deposit is already paid. The security deposit may be paid by most means, and most landlords typically accept the payment by a variety of means. The total money and cost of the security deposit is meant to cover the first month’s rent or two months’ rent.
For example, a sample security deposit clause is: “Tenant agrees to pay a security deposit in the sum of $2,000, which is equal to one month’s rent.”
Landlord and Tenant Attorney Experienced in State Laws on Security Deposits
If you need help on laws regarding security deposits, and you have an interest in learning more, contact James Arrasmith, an experienced landlord-tenant attorney. James Arrasmith can advise you as to the legal issue that you may be facing, whether you are a landlord or a tenant. Lawyer James Arrasmith can further help you interpret the lease agreement as a whole, including what is reasonable wear concerning last month’s rent. James Arrasmith is the best Sacramento tenant lawyer when it comes to security deposits. He is here to help you with your lease or rental agreement concerning the rental property.