Security Deposits: A Primer [Updated]

July 11, 2024July 14, 2024 Mark Elliot security deposit

One of the challenges of renting is the upfront cost: a prospective tenant will hand over the first month’s rent plus thousands more in a security deposit. Until recent legislation limited the deposit to one month’s rent, a landlord could demand two months’ rent for a total upfront cost of three times the asking rent. That deposit has a purpose; it is not there for the taking. But what happens when an unscrupulous landlord takes it? That is grand theft and it happens much more often than we know. Here is what you need to know about the security deposit.

How Much Deposit May Be Demanded?

Pursuant to Assembly Bill 12, for most tenancies started after July 1, 2024 the landlord cannot demand a security deposit in excess of one month’s rent. The old limit was two month’s rent. The new, lower limit applies in most circumstances. That not only reduces the upfront cost of renting; it also eliminates an opportunity for the landlord to discriminate by charging one type of tenant a larger security deposit than another tenant simply because the landlord presumes greater risk.

Two things to know about AB 12 and the one-month security deposit limit:

1) there are some limited exceptions as we explain in Sacramento Limits Security Deposits to One Month’s Rent. If the landlord owns no more than four units across a maximum of two rental properties AND is a natural person, or a limited liability company in which all members are natural persons, then the landlord can still demand two month’s rent.

2) tenancies that existed prior to AB 12 and which have security deposits greater than the limit that is now in effect are effectively grandfathered with respect to the security deposit. The landlord is not obligated to refund any part of it until the tenancy ends.

Finally, the maximum security deposit amount allowed by law is inclusive of all deposits. If the landlord requires a key deposit, or a pet deposit, then the total for all deposits cannot exceed the maximum deposit limit. Also, a deposit that was demanded for a specific purpose, such as for a pet or for keys, is separate from the security deposit. Such deposits must be returned in entirety if there is no reason to deduct (for pet damage or lost keys, say). Because such deposits are separate, if rent is owed then it must be deducted from the security deposit and not deducted from any other deposit.

For What Purposes Can the Landlord Deduct From the Security Deposit?

Civil Code section §1950.5(b) is explicit on the reasons for deducting from a tenant’s security deposit:

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

Civil Code §1950.5(e) is as explicit about expenses which the landlord cannot deduct from the security deposit:

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.

Instances where the landlord can’t deduct from the security deposit:

To paint an apartment after a tenant vacates. Unless the departing tenant has caused damage, or caused wear-and-tear beyond that which is ordinary, the landlord cannot repaint and charge that to the departing tenant. It is a cost of doing business to make the apartment appealing to the prospective tenant.
To repair, or replace, an appliance. Unless the tenant damaged the appliance, of course, because landlords are obligated to keep appliances in working order. If an appliance fails to function, or otherwise needs replacement, then it is the landlord’s responsibility.

Limits on Landlord Deductions

The law allows for deduction(s) from the security deposit in an amount only to cover the landlord’s actual costs for rent owed, damage done, or renewing, repairing, or replacing the fixtures or furnishings which are worn beyond ordinary wear-and-tear. The landlord can also deduct for cleaning “necessary to return the unit to the same level of cleanliness it was in at the inception of the tenancy.”

That makes it imperative that upon move-in the new tenant thoroughly document the condition of the apartment. The landlord may provide a checklist for the purpose; alternately the tenant can ask the landlord to note issues that need repair (and agree to repair them). We can’t stress enough how important it is to take pictures throughout in order to establish conditions at move in.

A landlord may deduct from the security deposit an amount the tenant thinks is unreasonable given the conditions. Indeed “ordinary wear and tear” is not precisely defined in the law. Consult the California Department of Real Estate guide to security deposits which provides some useful examples.

Deduction(s) must be itemized. Civil Code §1950.5(g)(1) reads:

No later than 21 calendar days after the tenant has vacated the premises, but not earlier than the time that either the landlord or the tenant provides a notice to terminate the tenancy under Section 1946 or 1946.1, Section 1161 of the Code of Civil Procedure, or not earlier than 60 calendar days prior to the expiration of a fixed-term lease, 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.

That is pretty straightforward. However know that the law allows the landlord a deduction for repairs and cleaning together do not exceed $125. The resources appended at the bottom of this post provide a fuller explanation of what sort of accounting the landlord must provide.

How Long Must I Wait?

The deposit is to be returned within 21 calendar days of move-out. The security deposit is refundable; no part of it is non-refundable. So every expense that is deducted and must be itemized and the balance returned. If the deposit or balance thereof is not returned in a timely manner, then the tenant should on the 22nd day send a demand letter (which is a necessary step for later recovery of money owed in small claims court).

Some Other Important Aspects of the Security Deposit

Deposits do not earn interest for tenants in Beverly Hills. Some localities do require interest to be paid to the tenant at a rate that it determined by the locality. In Beverly Hills, though, the landlord is free to use the deposit money to invest and earn interest even as the deposit loses value due to inflation. The landlord’s cost of using that money is zero.

The itemized statement must include: 1) The amount of any bill, invoice or receipt (with the name, address, and telephone number of the contractor); 2) A statement that “reasonably” describes value of the work if that work was performed by the landlord; 3) and if the necessary work to restore the unit to the condition in which it was rented cannot be completed within 21 days after the end of the tenancy, then the landlord may provide a “good faith estimate” of charges and deductions.

In the latter instance, the landlord must provide to the tenant the amount of the actual charge within 14 days after the repair is completed and the balance of the security deposit returned.

We suggest that any deductions by the landlord be scrutinized. Does the indicated vendor seem legitimate? Is there a Yelp listing or a website for the vendor? Does the vendor answer the phone professionally? We have seen the occasional landlord provide what appears to be a sham receipt for very substantial deductions. That would be straight-up fraud in any other context, but when it comes to residential rental housing it is simply another trap for a tenant.

In fact, these protections and many more related to the security deposit are written into law with such specificity precisely because, for too long, some or all of tenants’ security deposits have been stolen by unscrupulous or criminal landlords.

Security deposit theft may be difficult to avoid with the worst landlords, but there are steps one can take to discourage the marginal landlords who might think twice. Read more in our explainer: Security Deposit: Ten Steps to a Timely Refund. And have a look at tenant advocacy group Tenant Together’s deposit resources page.