Security Deposits: Handle with Care

Security Deposits: Handle With Care

It is important that both residential landlords and tenants are familiar with the handling of security deposits in California: landlords so s/he can remit to the tenant properly in accordance with the law and tenants so s/he knows what to expect both in terms of when a security deposit is to be returned and what may be returned.  

First and foremost, if a tenant has made a security deposit, s/he is entitled to its return. California law prohibits a lease or rental agreement from characterizing security as “nonrefundable.” Further, a tenant’s claim for a refund of security has priority over the claims of landlord’s creditors. In other words, if you have made a security deposit, you are entitled to its return. And if you are a residential landlord, characterizing a security deposit as “nonrefundable” will not allow you to retain the deposit.

Upon a tenant’s vacation of the premises, the tenant is entitled to an itemized statement indicating the basis for, and the amount of, any security received and disposition of said security. Along with that itemized statement, the tenant is entitled to a return of any remaining portion of the security. Both the itemized statement and balance of the security must be sent to the tenant by personal delivery or first class mail, postage prepaid, unless the landlord and tenant mutually agree to another mode of service.

As for what may be deducted, both the tenant and landlord should look to the lease at it should expressly provide the purposes for the deposit. For example, when the deposit is security for the payment of rent, cleaning of premises, or repair of damages caused by the tenant, these items may be deducted by the landlord to the extent reasonably necessary to remedy a tenant’s defaults as to those items. The landlord’s right to deduct is limited to the purposes designated in the lease, so a landlord cannot, for example, make a deduction to repair damages that preexisted the tenancy or for ordinary wear and tear.

Should a landlord fail to adhere to these requirements, the tenant could have a legal claim against the landlord for bad faith retention of the security deposit. Further, should the landlord’s retention be found to be in bad faith, the landlord would be subject to statutory damages which, in addition to the actual damages for retention of the deposit, could amount to up to twice the amount of the security. Thus, it is extremely important for a residential landlord to handle security deposits with care and act diligently in making repairs and deductions immediately after a tenant vacates.

This update is provided to our clients, business associates and friends for informational purposes only. Legal advice should be based on your specific situation and provided by a qualified attorney.