California Civil Code Section 1950.5 states rules that landlords and tenants must follow when handling security deposits. California cities as a whole generally abide by these supervisions; however, there are cities, such as San Francisco, that place additional rules on the security deposit process.

Many times tenants are unaware of these existing laws and lose out on money owed to them. Its important tenants familiarize themselves with these regulations as they are put in place to protect their rights.

To first understand these laws, one must know how California defines a security deposit. According to state law, “security” means any payment, fee, deposit, or charge which is imposed at the beginning of the tenancy to be used to reimburse the landlord for costs associated with processing a new tenant and may be used for four purposes:

1 For unpaid rent;

2.For cleaning the rental unit when the tenant moves out, but only to make the unit as clean as it was when the tenant first moved in;

3.For repair of damages, other than normal wear and tear, caused by the tenant or the tenant’s guest; and

4.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.
The total amounts a landlord can charge for the deposit is twice the amount of the monthly rent, or if furnished, triple the amount of the monthly rent. On rare occasion, the landlord may collect an additional deposit if the tenant owns, or the rental unit includes a waterbed.

It’s essential to note there is no such thing in the state of California as “last month’s rent.” This is a common misconception among tenants who believe they already paid their last month’s rent. However, no matter what it’s called – a key deposit, cleaning fee, move-in fee, closing costs, last month’s rent, etc. – it’s all held as a security deposit.

Prior to move-in, it is recommended tenants walk through the unit and take note of its current condition along with pictures for evidence after tenancy. Once the lease expires, state law requires landlords complete a pre-move-out inspection with the tenant giving them a chance to repair any defected items.

A landlord may only deduct amounts needed to repair, clean, or replace furnishings which incurred excessive damage during tenancy.

If your landlord chooses to withhold part of the security deposit, they are required to provide receipts documenting the costs of claimed repairs with an itemized statement. The landlord then has 21 days after the tenant moves out to return the security deposit with invoice. On the other hand, if work is still being completed, the owner must send the tenant a copy of the quoted estimate for the work along with vendor’s contact information within the 21-day period.

San Francisco property owners are required to make annual payments of interest on security deposits. If not already given, tenants can ask landlords for the interest payment and landlords are responsible for paying once requested. Interest rates are set every year by the Rent Board (although the Rent Board does not have jurisdiction over adjudicating security deposit disputes) and the percentage rate i for 2012 is .4 percent on the deposit.