Security Deposits 101

By DANIEL BORNSTEIN, ESQ.

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After wrapping up a series that exposed the saddening condition of hoarding and the steps landlords could take to address tenant hoarding in their units, we wanted to move on to a topic more germane to all landlords – security deposits.

A little trivia. The #1 reason rental property owners end up in Small Claims Court are landlord-tenant disputes over security deposits, but being dragged into Court can be anything but trivial. Landlords must understand the relevant laws, which are codified in California Civil Code §1950.5.

This process begins, of course, with the collection of the deposit. The maximum security deposit is up to two times the monthly rent if the rental unit is unfurnished and up to three times the monthly rent if the unit is furnished. Landlords are entitled to ask for additional half-month’s rent when the tenant has a waterbed.

Deposits can come in many forms, be it last month’s rent, pet deposits, key deposits, cleaning deposits and other such safeguards against future losses, yet regardless of the terms, they are all considered under the law to be part of the security deposit and collectively, may not exceed legal limits when they are all tallied up. One legal snag we’ve seen at Bornstein Law is when certain courts rule that itemized deposits must only be used for its stated purpose. For example, a pet deposit can only be used for pet damage, and not for any other damages unrelated to the pet.

Therefore, we always advise clients to have a single security deposit to avoid exceeding the statutory maximum and to ensure the landlord has the latitude to apply the deposit towards any loss, irrespective of how the damage occurred.

When reviewing lease agreements, not uncommonly we see “nonrefundable” deposits such as an automatic deduction for flea spraying where there has been a pet. If you have a nonrefundable deposit, it is a problem – this is not permitted under the law. When the tenant dutifully complies with the terms of the lease, that tenant is entitled to 100% of their security deposit.

Within a reasonable time after either the landlord or the tenant gives notice of termination of the tenancy, or on the eve of the lease term ending, landlords must notify the tenant in writing of the tenant’s option to request a pre-move out inspection, and make it clear that the tenant has the right to be present at the inspection. Pre-move out inspections are one of many additional topics related to security deposits that we’ll reserve for future posts. Follow us on Facebook to stay in the know.

 

 

As the founding attorney of Bornstein Law, Broker of Record for Bay Property Group and expert witness, Daniel Bornstein is a foremost and well-respected expert in landlord-tenant disputes and other property management issues with over 23 years of experience in handling real estate and civil litigation related disputes in and throughout the Bay Area. More than a litigator, Daniel manages rental properties, assists in completing real estate transactions and is well known for his educational seminars. He is always eager to answer questions and engage with Bay Area landlords, property owners and real estate professionals. Email him today.