Disputes Regarding Security Deposits

A disagreement regarding use of a tenant’s security deposit is one of the more common types of landlord-tenant disputes. California law regulates the amount and use of security deposits as well as the procedures for disposition of the security deposit.. We assist landlords and property management companies in drafting leases and notices to comply with the law and make these types of disputes less likely. When a disagreement arises regarding a security deposit, we provide legal advice and representation to resolve the dipsute.

Applicable Law

Security deposits for residential rental property is governed primarily by Civil Code section 1950.5. Security deposits on commercial property are governed by Civil Code section 1950.7.

Definition of Residential Security Deposit

In general, “any payment, fee, deposit or charge” imposed by a landlord at the beginning of a tenancy, except for a tenant screening fee and first month’s rent, is considered a refundable security deposit. For example, if a landlord charges first and last month’s rent, last month’s rent is considered a security deposit under the law.

Residential Screening Fee

Civil Code section 1950.6 allows a landlord to charge an application screening fee to cover the costs of obtaining information about the applicant. The fee is limited by statute and is not considered part of the security deposit.

Maximum Amount of Residential Security Deposit
The maximum amount of a residential security deposit is two months rent for an unfurnished apartment and three months rent for a furnished apartment.

Deposit Refundable

A residential rental agreement cannot characterize tenant a tenant security deposit as nonrefundable. Unlike rent, which belongs to the landlord, a security deposit is the tenant’s property unless and until properly used to remedy a tenant’s rent default and/or to compensate the landlord for damage and cleaning.

Vacating Tenant’s Tight To Initial Inspection

Within a reasonable time following notification of either party’s intent to terminate the tenancy, or before the end of the lease term, the landlord is generally required to give the tenant written notice of his or her right to request an initial inspection of the unit and to be present at the inspection. However, the landlord is not required to provide notification of the tenant’s right to an initial inspection when the tenancy is terminated pursuant to a three-day notice for nonpayment of rent, breach of the lease, assignment, subletting or committing waste or nuisance. The initial inspection allows the tenant the opportunity to remedy identified deficiencies in order to avoid deductions from the security. This initial inspection is required only if the tenant requests it.

Accounting For the Deposit With 21 Days After Tenant Vacates

Within 21 days after the tenant vacates, the landlord must provide the tenant, by personal delivery or postage prepaid first-class mail, with a copy of an itemized statement indicating the basis for and amount of any security received and the disposition of that security (i.e., showing what amounts are being retained and for what reasons) and return to the tenant any remaining portion of the security. Along with the itemized statement, the landlord must include copies of documents showing charges incurred and deducted by the landlord to repair and/or clean the premises. If a repair to be done by the landlord or landlord’s employee cannot reasonably be completed within 21 calendar days after the tenant has vacated, or if the requisite documents from anyone else who provided the repair/cleaning services, materials or supplies are not in the landlord’s possession within that 21-day period, the landlord may deduct the amount of a good faith estimate of the charges that will be incurred and include that estimate with the tenant’s itemized statement.

Interest on Security Deposit

Normally, a landlord is not required to pay a tenant interest on a security deposit. However, some cities have enacted ordinances requiring payment of interest.