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SECURITY DEPOSIT


At the beginning of the tenancy, you most likely will require the tenant to pay a security deposit. You can use the security deposit, for example, if the tenant moves out owing rent, damage the rental unit beyond normal wear and tear, or leaves the rental less clean than when the tenant moved in. Under California law, a lease or rental agreement cannot say that a security deposit is "nonrefundable." This means that when the tenancy ends, you must return to the tenant any payment that is a security deposit, unless you properly use the deposit for a lawful purpose, as described below and under Refunds of Security Deposits. The security deposit may be called last month's rent, security deposit, pet deposit, key fee, or cleaning fee. The security deposit may be a combination, for example, of the last month's rent plus a specific amount for security. No matter what these payments or fees are called, the law considers them all, as well as any other deposit or charge, to be part of the security deposit. The one exception to this rule the application screening fee. The application screening fee is not part of the security deposit. However, any other fee charged by the landlord at the beginning of the tenancy to cover the landlord's cost of processing a new tenant is part of the security deposit. Here are examples of the two kinds of fees:

Tenante Application screening fee – is charged to cover the cost of obtaining information about the tenants, such as checking their personal references and obtaining your credit reports. The application screening fee is not part of the security deposit. Therefore, it is not refundable as part of the security deposit. New tenant processing fee - You might charge you a fee to get reimbursed for the costs of processing your tenants as new tenants. Be advised however that these kinds of fees are part of the security deposit. Therefore, these fees are refundable as part of the security deposit, unless you properly use the deposit for a lawful purpose, as described below and under Refunds of Security Deposits. The law limits the total amount that you can require the tenant to pay as a security deposit. The total amount allowed as security depends on whether the rental unit is unfurnished or furnished and whether you have a waterbed. Unfurnished rental unit: The total amount that you can require as security cannot be more than the amount of two months' rent. If the tenant has a waterbed, the total amount allowed as security can be up to two and-a-half times the monthly rent. Furnished rental unit: The total amount that you can require as security cannot be more than the amount of three months' rent. If the tenant has a waterbed, the total amount allowed as security can be up to three-and-a-half times the monthly rent. Plus first month's rent: You can require the tenant to pay the first month's rent in addition to the security deposit. You cannot normally require the tenant to pay the security deposit in cash, however you can require a Cashier’s Check, or Certified Check.. A payment that is a security deposit cannot be nonrefundable. However, when the tenant moves out of the rental, the law allows you to keep part or all of the security deposit in any one or more of the following situations:
  • The tenant owes rent;

  • The tenant leaves the rental less clean than when he or she moved in;

  • The tenant has damaged the rental beyond normal wear and tear; and

The tenant fails to restore personal property (such as keys or furniture), other than because of normal wear and tear. If none of these circumstances is present, you must return the entire amount that the tenant has paid as security. You have 21 days from the day the tenant returns possession to you to account for the security deposit. Any expenses reported must have a receipt. Mail the statement to the last known address, with a check if there is a surplus, or with a bill if there is a deficit.