Security Deposit Guide in California

As a California landlord, understanding landlord-tenant law is crucial to safeguard your interests and investment property. One key aspect of this law is the ability to collect a security deposit from tenants. Keep this California security deposit guide handy for reference.

In this guide, you will find:

• What is a security deposit in California?
• Disposition of security deposit in California.
• What Can I Use the Security Deposit For?
• How AB12 Affects Security Deposits

What is a security deposit in California?

A security deposit, usually equal to 1 to 2 month’s rent, is held by the landlord to cover potential damages or unpaid rent caused by the tenant. When the tenant moves out, the landlord must return the deposit, but may deduct some amount for specific expenses like repairing damages. If the tenant provides notice, the landlord must inform them in writing about the option for a pre-inspection. This allows the tenant to fix any issues before moving out to ensure the return of their security deposit.

Later in this security deposit guide, we’ll go over how recent changes in legislation affects security deposits in California.

Disposition of Security Deposit in California

After a tenant moves out, the landlord must, within 21 days:

• Return the full security deposit.
• Return the security deposit minus deductions, providing an itemized statement explaining the deductions and reasons.
• If deductions exceed $125.00, the landlord must include invoices or receipts. If the landlord or their employee did the work, details about the work, time spent, and reasonable hourly rates must be provided.

What Can I Use the Security Deposit For?

The landlord can deduct and use the security deposit for the following reasons.

Unpaid Utilities – According to California security deposit law, landlords can use the security deposit to settle any unpaid utilities under the tenant’s name upon move-out.

Excessive Cleaning Costs – When tenants fail to leave the property in a reasonably clean condition, landlords can utilize the security deposit to cover the expenses associated with excessive cleaning, as per lease agreements.

Lost Rent Payments – If tenants breach the rental contract by not paying rent, landlords have the right to use part or all of the security deposit to offset the financial loss resulting from nonpayment.

Recovering Lost Rental Income – In cases where tenants abandon the property or terminate the lease prematurely, landlords can deduct from the security deposit to recover losses related to these situations.

Excessive Property Damage Repair – Landlords can use the security deposit to address damages beyond normal wear and tear, enabling them to cover the costs of repairing significant property damage.

While landlords can typically use part of the security deposit for unpaid rent, there are exceptions, such as not being allowed to use the deposit to cover COVID-19 rental debt.

How AB12 Affects Security Deposits

Effective July 1st, 2024, AB12 will limit how much landlords can hold as security deposit. You can read a more thorough explanation by visiting new laws of 2024.

• Landlords can only hold 1 month’s rent as a security deposit, regardless if it is furnished or unfurnished.
• Exemptions:
  • Small landlords (a natural person or limited liability corporation) who own no more than two residential rental properties and have no more than 4 total units can hold no more than two (2) month’s rent as a security deposit.
  • If the applicant or soon to be tenant is a servicemember, landlords can only hold no more than one (1) month’s rent as a security deposit, regardless if the landlord qualifies as a small landlord.

I hope this security deposit guide for California rental properties clears up doubts you had. Please remember, I am not a lawyer. Always consult with your legal counsel of choice.