Security Deposits: A Primer

One of the challenges of renting is the up-front cost: a prospective Beverly Hills tenant can expect to hand over about $5,000 to rent a 1-bedroom apartment while a 2-bedroom household may need $7,000 to start. A hefty two-month deposit would add another 50%. But another challenge is renting when the landlord delays returning the deposit or takes a big bite out of it. What’s the law?

Security Deposit Basics

State law is clear on the purpose of the security deposit. It is fourfold:

  1. To compensate the landlord for the tenant’s default in the payment of rent;
  2. To repair damage to the premises exclusive of ordinary wear and tear;
  3. To clean the premises “to the same level of cleanliness it was in at the inception of the tenancy”;
  4. To “restore, replace, or return personal property or appurtenances exclusive of ordinary wear and tear” (including keys).

To protect tenants the law restricts any deduction from the security deposit to reflect only actual costs incurred by the landlord. He must refund the balance of the security deposit along with a statement for any deductions if totaling more than $125. That money is to be returned within 21 calendar days of move-out.

Because security deposits are not always returned in a timely fashion, and sometimes dinged by improper deductions, the law is clear about respective tenant and landlord obligations. Let’s summarize the key points.

The deposit demanded by a landlord for an apartment in California cannot exceed two times the monthly rent. That is the maximum deposit allowed by law inclusive of any other deposit. So if the landlord requires a security deposit, a key deposit, and a pet deposit, say, the total for all deposits cannot exceed the equivalent of two months rent.

Per Civil Code section §1950.5(c):

A landlord may not demand or receive security, however denominated, in an amount or value in excess of an amount equal to two months’ rent, in the case of unfurnished residential property, and an amount equal to three months’ rent, in the case of furnished residential property, in addition to any rent for the first month paid on or before initial occupancy.

The landlord cannot ask the tenant to pay the last month’s rent upfront. In California the tenant pays only the first month upfront. The last month’s rent is due at the beginning of the final period of the tenancy (often the 1st day of the last month) not before. And no part of the deposit can be used for the last month’s rent. Do not ask, or expect, a landlord to apply any part of the deposit to cover the last month. The month of transition between units is the hump month because the last month’s rent comes about the same time as is due the first month and deposit on the new place. Ouch!

No part of the security deposit is non-refundable. The law does not allow the landlord to require a non-refundable deposit and the tenant cannot consent to it. The security deposit must be refunded (less the landlord’s actual cost to return the apartment to the condition in which it was originally rented).

The deposit to hold an apartment can be non-refundable. In this sense it is different than the security deposit. And it is common sense: when a tenant puts down a deposit to hold an apartment but chooses not to follow through, then the tenant forfeits the deposit.

Deposits do not earn interest for Beverly Hills tenants. Some localities require interest to be paid to the tenant on the deposit.  Beverly Hills does not require interest to be paid because the state law does not require it. Our rent stabilization ordinance has taken a less-is-more approach to tenant protections until recently. Returning the deposit interest was not among those protections. In a time of low inflation when the federal benchmark rate nears zero, deposits aren’t paying any interest anyway. That said, as inflation ticks up, and rents rise, that earned interest is more considerable yet under our ordinance it accrues to the landlord. Some will use your deposit money to invest — and to them the cost of that money is zero.

The deposit earmarked for a specific purpose stands apart from the general security deposit. If a deposit is demanded for a pet, then that deposit must be returned if there is no damage from the pet specifically. The earmarked deposit is not commingled with the security deposit. Likewise, if the cost to repair pet damage exceeds the pet deposit, then the excess cannot be deducted from the security deposit (the landlord must bring a civil action to recover the cost).

Ordinary wear-and-tear is not the responsibility of the tenant. State law allows the landlord to deduct from the deposit the costs to return the apartment to the condition in which it was originally rented exclusive of ‘ordinary wear and tear.’ California Civil Code section 1950.5(e) states plainly:

The landlord may not assert a claim against the tenant or the security for damages to the premises or any defective conditions that preexisted the tenancy, for ordinary wear and tear or the effects thereof, whether the wear and tear preexisted the tenancy or occurred during the tenancy, or for the cumulative effects of ordinary wear and tear occurring during any one or more tenancies.

The landlord cannot withhold all or part of a security deposit for damage that predates the tenant’s occupancy. He cannot withhold deposit money to replace fixtures or furnishings that exhibit only ordinary wear and tear. (Though maintenance of fixtures is generally the responsibility of the landlord, our explainer, Habitability Code Violations: What You Need to Know, notes that some leases include clauses that allow a landlord to duck his responsibility.)

The landlord can deduct from the security deposit costs incurred for repairing damage to the unit or any required cleaning. The landlord is entitled to receive the apartment in a condition comparable to when it was rented exclusive of ordinary wear-and-tear. That seems simple enough. But cleanliness is of course subjective. Practically speaking it means the tenant should make every effort to return it clean and undamaged. That does not necessarily mean professional cleaning. And that does not necessarily mean fresh paint. The landlord cannot charge a tenant to paint if the tenant did not damage the paint!

Any deduction from a deposit must reflect the landlord’s actual cost (or a close approximation). The deduction provision is frequently abused and so the law is clear on this point: deduction(s) that total more than $125 must be documented in an itemized statement provided to the tenant within 21 days. The statement must include:

  • The amount of any bill, invoice or receipt (with the name, address, and telephone number of the contractor);
  • If work is performed by the landlord, a statement that “reasonably” describes value of the work;
  • If work not completed within 21 days after the tenancy ends, then a “good faith estimate” of charges and deductions for expected work;
  • For work commenced more than 21 days later, the amount of the charge to be provided to the tenant within 14 days after the repair is completed.

Landlords must return the remaining deposit (less documented deductions) within 21 days. The landlord must return the security deposit (less proper deductions, each fully documented) to the departed tenant either in person, by mail to the tenant’s forwarding address, or, if that is not available, then to the address of the vacated unit (presumably forwarded to the new address).

The full documentation can be waived in favor of an itemized statement only. The landlord is required to provide documentation his costs along with the itemized statement. But the tenant can waive, in writing, the right to receive documentation at the request of the landlord. However the waiver must substantially inform the tenant of what she is waiving. And even if a tenant does waives the right, she can still request documentation (like receipts) within 14 days of receiving the itemized statement. The landlord then has 14 days to provide it.

The landlord’s itemized statement and documentation should be scrutinized. Again, deductions should reflect reasonable and actual costs for work required to bring the apartment up to the condition in which it was rented. That may include spot touch-ups to the paint but not a full paint job. If the tenant did her own painting without the landlord’s approval, then it may well be reasonable to pay to repaint. Repairs to appliances or other maintenance is not ordinary wear-and-tear and should not be deducted. And documentation should support those costs. Give the landlord’s statement and documentation the same attention he gives a tenant’s application to rent!

Receipts should be requested for any cost not sufficiently documented. Does a vendor seem legitimate? Does he have a Yelp listing or a website? If not ask further about the charge if it is significant. Does a charge from the landlord’s in-house repairman reflect a reasonable hourly wage? Any questions about the documentation should be pursued within 14 days of receiving the statement. The landlord must comply. And if the landlord is not responsive to any request, then the tenant should bring that evidence to small claims court.

These protections are written into law with this specificity because the security deposit is too often abused by the landlord. Most play fair. Some aren’t even knowledgeable about the law. And a few play fast-and-loose perhaps testing the tenant or, when challenged, resorting to bullying tactics. Don’t fall for it.

We encourage every tenant not to walk away from a deposit because that only encourages lawless behavior. And besides, it is the tenant’s money. For more on security deposits please refer to the helpful California Tenants Guide. Pet deposit information is found on page 24.