What are the best practices and laws for managing security deposits?
Security Deposit Deductions
(Civil Code 1950.5)
California law specifically allows owner to use a resident's security deposit for four purposes:
- For unpaid rent.
- For cleaning the rental unit when resident moves out, but only to make unit as clean as it was when resident first moved in.
- For repair of damages, other than normal wear and tear, caused by the resident or the resident's guests.
- If the lease or rental agreement allows it, for the cost of restoring or replacing furniture, furnishings, or other items of personal property (including keys), other than because of normal wear and tear.
Beware: Deductions can oftentimes be challenged in small claims court, so make sure to have ample evidence--take photos.
Collecting Rent After Move-out
When looking to collect remaining balance of rent after move-out, the security deposit can typically be used to cover any rent due. If rent due exceeds security deposit amount, owner can take resident to small claims court for judgment of remaining balance owed. You can sue for up to $10,000, if you are an individual or a sole proprietor.
Returning Security Deposit
Under California law, 21 calendar days or less after a resident moves out (hands in keys), a rental owner must either:
- Send full refund of security deposit to former resident.
- Mail or personally deliver to resident an itemized statement that lists amounts of deductions from security deposit and reasons for deductions, plus remaining balance of the deposit.
Good Faith Estimates
Rental owner is allowed to make a “good faith estimate” of charges and include estimate in the itemized statement in two situations:
- The repair is being done by the owner or an employee and cannot reasonably be completed within the 21 days, or services or materials are being supplied by another person or business and the owner does not have the invoice or receipt within the 21 days.
- Within 14 calendar days after completing the repairs or receiving the invoice or receipt, the owner must mail or deliver to former resident a correct itemized statement, invoices and receipts, and any refund to former resident.