Tips for Landlords to Handle Security Deposits Properly

Security deposits are an essential aspect of the landlord-tenant relationship but can often lead to disputes if not handled correctly. In California, strict laws govern the collection, use, and return of security deposits. By following proper procedures, landlords can ensure compliance with the law, maintain a positive relationship with tenants, and avoid costly legal disputes.

1. Conduct Thorough Move-In and Move-Out Inspections

• Move-In Inspection: Before a tenant moves in, document the property's condition thoroughly. Take clear photos or videos of each room, noting any pre-existing damages or issues. Provide the tenant with a checklist to sign, confirming the property’s condition at move-in.
• Move-Out Inspection: This inspection gives tenants the       opportunity to address issues before the final move-out date. Provide       tenants with a written list of any deductions you plan to make from the       security deposit, giving them time to make repairs or clean.

2. Collect and Use Security Deposits Legally

• Under California law, starting in July 1, 2024, the maximum security deposit a landlord can collect is one months’ rent. For landlords who own no more than two residential properties that collectively include no more than four total units for rent, the limit is two times the monthly rent, but only if the landlord is a natural person or a limited liability company in which all members are natural persons.
• Security deposits can only be used for specific purposes, such as unpaid rent, repairing damages beyond normal wear and tear, cleaning the unit to return it to its original condition, and restoring personal property or keys.

3. Provide Itemized Deductions for Damages

         When deductions are made, landlords must provide an itemized statement to the tenant. This statement should include:

• A detailed list of damages or issues.
• The cost of repairs or cleaning.
• Copies of receipts or invoices for work completed.
• An explanation if estimates are used instead of actual costs.
• Transparency in this process helps build trust and reduces the likelihood of disputes.

4. Return Deposits Within the Legally Required Timeframe

• In California, landlords must return the security deposit, along with any required itemized statement, within 21 days of the tenant vacating the property.
• If deductions are made, return the remaining balance along with documentation. Failure to comply with this timeframe can result in penalties, including the tenant’s ability to sue for damages and legal fees.

5. Understand Normal Wear and Tear vs. Damages

• Landlords cannot charge tenants for normal wear and tear, such as minor carpet wear, faded paint, or small nail holes from hanging pictures.
• Deductions are only permissible for damages caused by neglect, misuse, or abuse, such as large stains on the carpet, broken fixtures, or unapproved alterations to the unit.

6. Maintain Clear Communication with Tenants

• Open and clear communication with tenants about the security deposit process can prevent misunderstandings. Provide written guidelines at the start of the lease, outlining expectations for property care and the move-out process.
• Respond promptly to tenant inquiries regarding the security deposit, especially after move-out.