While not quite as “tenant friendly” as other states when it comes to security deposits, California law still regulates a lot of the process—including when a deposit must be returned to the tenant and what deductions the landlord is allowed to make.
Deposits are capped at two times the rent
In California, security deposits are capped at two times the monthly rent for unfurnished apartments. The cap is raised to three times the monthly rent for furnished apartments.1
Any fees other than the application fee are part of the security deposit
According to state law, any payments besides the application fee are considered part of the security deposit. Even if these costs are labeled something different—a "pet fee" or "administrative fee," for instance—the total cost can't exceed the two- or three-months' cap on the security deposit. And, since these fees are part of the security deposit, they also must be refundable.
Tenants always retain the rights to their money
A security deposit belongs to a tenant for the entirety of their lease. This is a strict rule and means that, even if the landlord declares bankruptcy, the tenant must receive their deposit back.1 Unlike some other states, a landlord has no duty to pay to the tenant any interest that accrues on a security deposit. In addition, they’re not required to hold security deposits in specific accounts or avoid mixing deposits with personal or other business funds.2
If a landlord sells their property, or if (in a very specific and unusual circumstance) they sell their right to profit from the lease to a third party, they must also transfer the security deposit to the purchaser of the property or the lease interest.1
Tenants have the right to an inspection before moving out
California law has created a highly specific process that gives tenants the opportunity to fix any issues that could result in a deduction from their security deposit. To start, either the tenant or the landlord must notify the other party of an intention to end the landlord-tenant relationship. (In the case of an eviction, this procedure doesn’t apply.)
The parties then work together to schedule an inspection of the property, which must happen within two weeks of the scheduled end date of the tenancy. If the landlord and tenant cannot agree on a time and day for the inspection, the landlord can set the date—but they must give 48 hours’ notice to the tenant. If the tenant is not home at that time, the landlord may still perform the inspection in the tenant’s absence.
Based on the inspection, the landlord is required to provide the tenant a list of alleged issues for which they intend to withhold a portion of the security deposit. Note that these issues must be one of the following:
- Damage caused by the tenant
- Rent not paid by the tenant
- A cleaning fee that will restore the property to the state it was in at the time of rental
The tenant then has the remainder of his or her tenancy to try and fix these problems and avoid any deductions from the deposit.
Generally speaking, however, a tenant does not have a duty to undertake repairs to a rented unit. In terms of security deposits, the tenant should be allowed the normal “wear and tear” that naturally accrues to a rental without being forced to spend money on renovations or maintenance. The landlord can’t withhold security deposit funds to repair such wear and tear.3
Landlords must return the deposit in 21 days
Once the tenancy is over, the landlord has 21 days to return any remaining funds to the tenant. They must also include a specific list showing what deductions were made, and why. The landlord needs to attach proof in the form of receipts for any materials purchased for repair (or, if a third party is used to complete the repairs, invoices for the work). If any work can’t be completed within that 21-day window, the landlord is allowed to provide a “good faith estimate” of what the work will cost and deduct that amount.1
Landlords can be sued for acting in “bad faith”
If a landlord breaches any of the rules described above, they can be liable for double the amount of the security deposit, plus any actual damages sustained by the tenant—and, if the landlord's conduct is egregious enough, attorney fees and punitive damages.4 However, the tenant must show that the landlord acted in “bad faith.”1
Unfortunately, there is little published case law explaining what exactly constitutes “bad faith.” In one prominent case, bad faith was found to exist when a landlord, as a matter of practice, would withhold deposits for normal wear and tear.4 In another case, a California court hinted that “bad faith” may accrue when a landlord holds a deposit for a long amount of time.5
Claims of less than $10,000 can be heard in small claims court
Tenants and landlords with security deposit disputes may have their claims heard in small claims court if the claim is for less than $10,000, which provides a more streamlined process than housing court.1
The information provided on this website does not, and is not intended to, constitute legal advice.