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 tenant's security deposit for four purposes:
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 tenant 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 tenant moves out (hands in keys), a rental owner must either:
Good Faith Estimates
(Civil Code 1950.5)
California law specifically allows owner to use a tenant's security deposit for four purposes:
- For unpaid rent
- For cleaning the rental unit when tenant moves out, but only to make unit as clean as it was when tenant first moved in
- For repair of damages, other than normal wear and tear, caused by the tenant or the tenant'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
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 tenant 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 tenant moves out (hands in keys), a rental owner must either:
- Send full refund of security deposit to former tenant
- Mail or personally deliver to tenant 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 tenant a correct itemized statement, invoices and receipts, and any refund to former tenant.