Security Deposits – The Rules

Lease agreementLandlords  of Residential rental property are often confused as to what a security deposit is or is not.   Rental “security” is defined by the California Civil Code as “any payment, fee, deposit or charge, including but not limited to, any payment, fee, deposit, or charge, … that is imposed at the beginning of the tenancy to be used to reimburse the landlord for costs associated with processing a new tenant or that is imposed as an advance payment of rent, used or to be used for any purpose, including, but not limited to . . .”
  •  “Compensation to the landlord for the tenant’s default in payment of rent…” ;  (Note that it is for “default” of rent and is not rent.)
  • “Repairing damage to the premises (exclusive of ordinary wear and tear) caused by the tenant or by the tenant’s guests or licensees…”;
  • “Cleaning the premises upon termination of the tenancy and, for tenancies for which the tenant’s right to occupy began after January 1, 2003, cleaning “necessary to return the unit to the same level of cleanliness it was in at the inception of the tenancy”;
  •  “If the rental agreement expressly so provides, remedying future tenant defaults in an obligation under the rental agreement to restore, replace or return personal property or appurtenances (exclusive of ordinary wear and tear).”

The amount of security deposit that residential landlords may collect is limited by state statute and by local rent control regulations.    Such code restrictions are applicable to all residential landlords and apply in both in rent control and nonrent control jurisdictions: (There are not rent control areas in Orange County).

Typically, the landlord may ask for advance “rent”.  On or before initial occupancy, landlords may collect the first month’s rent.   In addition to the advance rent the landlord may also ask for up to two or three months’ advance rent may be collected depending on whether the unit is furnished or unfurnished.
(Unfurnished unit, a maximum two months’ rent as “security” is permissible.  For a furnished unit, up to three months’ advance rent may be collected as “security.”

Certain other deposits are generally allowed, such as deposits for:

  • Waterbeds: An extra security deposit in an amount equal to one-half of one month’s rent;
  • Six-month leases:  In long-term leases of six months or more, advance payments of “not less than six months’ rent” are permissible.
  • Alterations:  At the tenant’s request, landlord and tenant may agree to a specified fee for alterations or additional furnishings, excluding repair of existing damage and ordinary cleaning necessitated by a previous tenant’s occupancy (the latter expenses are charged against the prior tenant’s security deposit).
  • Disabled tenant accommodations:  Pursuant to law, landlords must allow disabled tenants–at their own expense–to make reasonable modifications to their rental units to the extent necessary to afford such tenants “full enjoyment of the premises”  Such modifications may be conditioned on the tenant’s entering into an agreement to restore the premises at the end of the tenancy. However, no additional “security deposit” may be required to assure restoration. Rather, the parties may negotiate, as part of the disabled tenant’s agreement to restore the premises, for the tenant’s payment of a “reasonable estimate” of the restoration cost into an escrow account.

Refund of security Deposits:  Under California law, residential security deposits are totally refundable.  After the tenant vacates your property, be advised that amounts deemed “security” must be held by the landlord for the tenant.  As a landlord, you do not have unlimited discretion to deal with the deposits, or to retain deposits when tenants vacate.

They are “non-refundable” only to the extent the California Civil Code expressly allows landlords to retain or use the deposits as previously described.   Specifically, upon termination of a tenancy, only those amounts may be claimed by the landlord as are reasonably necessary.“Reasonably necessary” under the code includes:

  • Unpaid rent that is due (including monies awarded by the court in a judgment);
  • Repair damage to the premises which refers to only such damage that was caused by the tenant or his or her guests or licensees. Moreover, the security cannot be retained to remedy “ordinary wear and tear” during the tenant’s term, or to repair any damage or defective conditions that preexisted the tenancy.
  • Clean the premises.
  • Restore, replace or return personal property to the extent that the rental agreement specifically authorized security to be applied for this purpose and, in all events, exclusive of “ordinary wear and tear.”

WRITTEN accounting and/or refund in a timely manner.  Specifically within three (3) weeks (21 days) after the tenant’s vacancy, you as landlord must do both of the following:

  • WRITTEN security deposit accounting: The law states that within three weeks after the tenant has vacated the premises, the landlord shall furnish the tenant, by personal delivery or by first-class mail, postage prepaid,
    • a copy of an itemized statement indicating the basis for, and the amount of, any security received and
    • the disposition of the security and shall return any remaining portion of the security to the tenant.

Failure to follow the law will expose the landlord to penalties under the law.

The foregoing information is offered to help inform you, however it is not intended as a substitute for professional legal help. Only a licensed lawyer can provide such help. Contact us online or call 949-855-0600 to set an appointment.

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