Most states have security deposit laws in place. These laws help regulate important aspects such as the collection, storage, and return of security deposits. In the state of California, the CA Civ. Code §1950.5 is the piece of legislation that regulates all matters regarding tenants’ security deposits. 

As a rental property owner in California, it’s important that you comply with it to avoid potential issues down the road. The following are the basics of the California security deposit laws. 

Security Deposit Limit

California landlords are limited to how much security deposit they can charge. The exact limit is dependent on whether a rental unit is furnished or not. 

If you’re renting out a furnished unit, you can ask for a maximum of 3 months’ rent as a security deposit. If renting out an unfurnished unit, however, the maximum you can ask a security deposit is two months’ rent. 

Nonrefundable Security Deposits 

Some states allow landlords to ask for a non-refundable security deposit. This, however,  is not the case in the state of California. In California, all deposits are regarded to be the property of the tenant. The only instance where you can keep a portion of a deposit to cover the cost of repairing damage exceeding normal wear and tear. 

California security deposit law

Additional Pet Deposits 

California law allows landlords who rent to tenants with pets to charge an additional pet deposit. The only exception is for tenants who have service or assistance animals. The Federal Fair Housing Act requires that landlords ensure tenants with such animals be granted full and equal access to housing. 

Besides disability, the Federal Fair Housing Act requires landlords to treat tenants fairly and equally regardless of their race, color, gender, nationality, religion, and familial status. 

In addition, California extends the list of protections on the basis of marital status, immigration status, gender identity/expression, citizenship status, ancestry, sexual orientation, primary language, income source, and military and veteran status. 

Security Deposit Storage 

Landlords have a responsibility to store their tenants’ security deposits during a tenancy. However, the state of California doesn’t specify in what manner they should be stored. This is unlike some other states, where landlords must store their tenant’s deposits in a separate account or an interest-accruing account. 

Security Deposit Receipt 

In some states like Florida, landlords are required to provide their tenants with a written notice after receipt of their deposit. In the written notice, there is some important information that must be indicated, for example:

  • The financial institution holding the security deposit 
  • Whether the money is being kept separate or is being mixed with personal or other funds 
  • The rate of interest the money is accruing on an annual basis 

a receipt of a Security deposit

That said, this is not the case in the state of California. You have no obligation to provide your tenants with a written receipt after receiving their security deposit. But while this is the case, having written proof of important details regarding the tenant’s deposit is always a good idea. 

Security Deposit Deductions

Landlords in California have a right to make certain deductions to tenants’ security deposits. You may be able to keep all or a portion of a tenant’s security deposit for any of the following reasons: 

  • The tenant defaults on rent payments
  • Damage caused to the unit exceeded normal wear and tear
  • To cover cleaning costs needed to restore the unit to its initial condition
  • To pay future debts that may be incurred due to a lease violation
  • You cannot make deductions from your tenant’s deposit in any of the following two scenarios: 
  • To pay for repairs relating to pre-existing conditions
  • To cover for damages resulting from normal wear and tear 

Walk-Through Inspection 

You can conduct a walk-through inspection. If you choose to have it, then your tenant obtains the right to be present. The goal of a walk-through inspection is to allow a landlord to pinpoint any potential issues that may need to be fixed prior to the tenant moving out. 

deductions from a security deposit

For a successful walk-through inspection, both you and your tenant must observe the following: 

  • The landlord must notify the tenant in writing about the intention to conduct the inspection 
  • The tenant has a right to waive their right to be present during the walk-through inspection. But if they agree, then a landlord must conduct it no sooner than 2 weeks prior to the end of the lease 
  • A landlord must provide their tenant with an advance notice 48 hours prior to the inspection 

After the inspection, you must provide your tenant with a list of all the required repairs that they would need to fix prior to moving out. 

Security Deposit Return 

As a landlord in California, the law requires that you refund the deposit within 21 days of the tenant moving out. If you’ve made deductions, you must attach an itemized statement alongside the portion of the deposit you’re returning. The itemized statement must contain the following details: 

  • The deposit amount you received 
  • A list of the itemized deductions 
  • An estimate of the cost of the repairs if the work is yet to be completed 
  • The portion of deposit you’re returning 

Sale of Rental Property 

You have two options if you choose to sell your investment property. One option is to transfer the deposit to the incoming landlord, minus deductions. And the other option is to return the deposit to the tenant, minus deductions. 

Bottom Line

As a landlord in California, it’s vital that you familiarize yourself with the state’s security deposit laws as well as the legal eviction process in California, rules surrounding early lease termination, and any other rental-related regulations. 

If you have a question regarding California landlord tenant laws or need expert help in the overall management of your rental property, Keyrenter Property Management San Diego can help. Get in touch to learn about how we can help you grow your real estate investment portfolio!

Disclaimer: This content isn’t a substitute for professional legal advice from a qualified attorney. Also, laws change and this article may not be updated at the time you read it.