California Security Deposit Laws

The New Standard: 1 Month’s Rent

As of July 1, 2024, most California landlords are limited to collecting a security deposit equal to one month’s rent. This applies to:

• Unfurnished units
• Furnished units
• Units with waterbeds
• Month-to-month and fixed-term leases

Small Landlord Exception (2 Months)

You may collect up to 2 months’ rent if you meet ALL of the following criteria:

• You are a natural person (individual) OR an LLC where all members are natural persons
• You own no more than 2 residential rental properties
• Those properties contain no more than 4 dwelling units total
• The tenant is NOT an active military servicemember

Military Servicemembers

If your tenant is an active duty servicemember, you can only collect 1 month’s rent as a security deposit—even if you qualify as a small landlord. This applies to members of:

• Army, Navy, Air Force, Marines, Coast Guard
• National Guard on active duty
• Commissioned corps of NOAA or Public Health Service

What Counts Toward the Limit

The security deposit limit includes any money or property collected beyond the first month’s rent, regardless of what you call it:

• Security deposit
• Last month’s rent
• Cleaning deposit
• Pet deposit
• Key deposit
• Any other refundable fee

Important: All of these together cannot exceed the applicable limit. There is no such thing as a “non-refundable deposit” in California—any deposit-type payment is refundable.

What Doesn’t Count

• First month’s rent: Not subject to the limit
• Application screening fees: Up to $62.02 (2024) for actual screening costs
• Pet rent: Monthly pet rent is separate from the deposit

Timing

Collect the security deposit before the tenant takes possession of the unit. Most landlords collect:

• Security deposit
• First month’s rent
• Prorated rent (if moving in mid-month)

All due before handing over keys.

Payment Methods

California law doesn’t restrict payment methods. You may accept:

• Certified check or cashier’s check (safest)
• Personal check (may want to wait for it to clear)
• Money order
• Electronic payment
• Cash (provide written receipt)

Written Receipt

While not strictly required by state law, best practice is to provide a written receipt showing:

• Amount received
• Date received
• Purpose (security deposit)
• Property address
• Signatures of landlord and tenant

Move-In Inspection

Conduct a thorough move-in inspection documenting the unit’s condition:

• Take dated photos/video of every room
• Note any existing damage or wear
• Have tenant sign acknowledgment of condition
• Keep records for comparison at move-out

This documentation protects you when making deductions later.

State Law: No Special Account Required

California state law does not require landlords to:

• Keep deposits in a separate account
• Keep deposits in an interest-bearing account
• Pay interest to tenants on deposits

You may commingle security deposits with your other funds.

⚠️ Exception: Local Laws May Differ

Several California cities have local ordinances requiring interest payments on security deposits. See the Local City Rules section for details on Los Angeles, San Francisco, Berkeley, and other cities.

Who Owns the Deposit

The security deposit is held by the landlord for the tenant. The tenant’s claim to the deposit is superior to any creditor of the landlord. This means:

• The deposit belongs to the tenant until properly applied
• Landlord creditors cannot claim tenant deposits
• If you sell the property, deposits transfer to the new owner

When Property Is Sold

If you sell your rental property, you must either:

1. Transfer all security deposits to the new owner AND notify tenants in writing of the transfer and new owner’s contact information, OR
2. Return the deposits directly to tenants (minus any lawful deductions)

Provide written notice within a reasonable time of the ownership change.

California law is very specific about what landlords can deduct from a security deposit. You may only deduct for the following purposes:

1. Unpaid Rent

You can deduct any rent the tenant owes, including:

• Past-due rent during tenancy
• Final month’s rent (prorated if applicable)
• Rent owed if tenant didn’t give proper notice

Note: You cannot deduct for future rent beyond the lease term if the tenant gave proper notice. If a tenant is behind on rent, you may also need to serve a 3-day notice to pay or quit.

2. Cleaning

You can deduct cleaning costs necessary to return the unit to the same level of cleanliness it was in when the tenant moved in.

• You cannot charge for routine cleaning expected between tenancies
• The unit doesn’t need to be “cleaner than clean”—just as clean as when they moved in
• Document the move-in condition to support cleaning charges

3. Damage Beyond Normal Wear and Tear

This is where most disputes arise. You can deduct for damage caused by the tenant, but NOT for normal wear and tear.

4. Restoring Personal Property

If your lease allows it, you can deduct to restore, replace, or return personal property provided with the rental (furniture, appliances beyond what’s standard), excluding normal wear and tear.

5. Breach of Lease Terms

Some lease violations may result in deductible costs, but be careful—this is a gray area. Consult an attorney if unsure.

What You CANNOT Deduct

• Pre-existing damage (document move-in condition!)
• Normal wear and tear
• Improvements or upgrades you wanted to make anyway
• Repainting unless damage beyond normal
• Carpet replacement if carpet was already old
• Your time or “administrative fees”

The 21-Day Rule

California law requires landlords to return the security deposit (or provide an itemized statement of deductions) within 21 calendar days after the tenant vacates and returns keys.

This is one of the strictest deadlines in the country—missing it can result in significant penalties.

What You Must Do Within 21 Days

• Return the full deposit if no deductions, OR
• Return the remaining balance plus an itemized statement of deductions
• Mail or personally deliver to the tenant’s last known address

When the Clock Starts

The 21-day period begins when:

• Tenant returns all keys, AND
• Tenant vacates the premises

If tenant abandons property without returning keys, the 21 days typically starts when you regain possession.

Where to Send It

Send the deposit return and statement to:

1. Forwarding address provided by tenant, OR
2. Last known address (the rental unit) if no forwarding address given

Request a forwarding address in writing before move-out, but failure to provide one doesn’t excuse the deadline.

Extension for Unfinished Repairs

If you can’t complete repairs within 21 days due to circumstances beyond your control, you may:

• Send an itemized statement within 21 days with a good faith estimate of costs
• Complete repairs as soon as reasonably possible
• Send a final statement within 14 days of completing repairs
• Include copies of invoices/receipts
• Return any remaining deposit owed

If you make any deductions from the deposit, you must provide an itemized statement. California law is very specific about what this must include:

Required Elements

1. Description of each deduction: Explain what you’re deducting for in reasonable detail
2. Amount of each deduction: Specific dollar amount for each item
3. Supporting documentation: Copies of receipts, invoices, or estimates

If Work Was Done by Third Party

You must include copies of:

• Invoices or receipts showing amount paid
• Description of work performed
• The third party’s name or business name

If Work Was Done by You (Landlord)

You must include:

• A reasonable description of the work
• Time spent on the work
• Reasonable hourly rate charged

The hourly rate must be reasonable—typically comparable to what a professional would charge in your area.

If Repairs Not Yet Completed (Good Faith Estimate)

Include:

• Statement that the amount is an estimate
• Good faith estimate of expected cost
• Copies of any bids or estimates from contractors
• Promise to provide final statement within 14 days of completion

California law requires landlords to offer tenants the opportunity for an initial inspection before they move out. This gives tenants a chance to fix issues and potentially get their full deposit back.

What You Must Do

1. Within a reasonable time after tenant gives notice to vacate, notify tenant in writing of their right to request an initial inspection
2. Include the procedures for requesting an inspection
3. If tenant requests, schedule the inspection during the final 2 weeks of tenancy
4. During inspection, identify any defects that would justify deductions
5. Give tenant a written itemized statement of defects
6. Give tenant reasonable opportunity to remedy defects before final move-out

Important Notes

• Tenant can choose not to request an inspection—that’s their right
• The inspection is not a waiver of your right to make deductions at final move-out
• You can identify additional damage at final move-out that wasn’t visible or didn’t exist at initial inspection
• Keep copies of all written notices and inspection findings

Several California cities have local ordinances that add requirements beyond state law. If your rental is in one of these cities, you must comply with both state and local rules.

Other Cities with Interest Requirements

Additional cities with security deposit interest requirements include:

• East Palo Alto
• Hayward
• San Jose (under certain conditions)
• Mountain View (for CSFRA-covered units)

Always check: Before renting in any California city, verify current local ordinances. Rules change frequently, and penalties for non-compliance can be significant.

Bad Faith Standard

The 2x penalty applies when a landlord acts in “bad faith.” Courts have found bad faith when:

• Landlord knew deductions were improper but made them anyway
• Landlord failed to return deposit without legitimate reason
• Landlord made false claims about damage
• Landlord refused to provide itemization
• Significant delay beyond 21 days without justification

How Tenants Recover

Tenants can pursue claims through:

• Small Claims Court: Up to $12,500 (individuals) or $6,250 (businesses)
• Regular Civil Court: For larger amounts
• Rent Board: In some cities with local ordinances

The landlord has the burden of proving deductions were proper.