California Security Deposit Collections & Holdings

California Security Deposit Collections & Holdings

Last Updated: December 29, 2022 by Ashley Porter

Quick Facts Answer
Maximum / Limit 2 or 3 Months’ Rent (with exceptions)
Receipt Requirement None
Inventory Requirement None
Interest Requirement None

To learn about laws on security deposit returns in California, click here.

Maximum Security Deposit Allowed in California

California law limits the maximum security deposit to two months’ rent if the unit is unfurnished and three months’ rent  if furnished, except:

  • If the tenant has a waterbed, add one-half month’s rent
  • If the tenant is an active service member, subtract one month’s rent except in some circumstances

Landlords do not have to subtract one month’s rent from the maximum security deposit if the active service member has a history of poor credit, a history of damage to rental property, or at least one person on the lease is not a spouse, domestic partner, parent or dependent of the service member.

For example, if a tenant rents a furnished unit and they have a waterbed, the maximum security deposit is three and a half times one month’s rent. If an active service member rents an unfurnished unit and has a waterbed, the maximum security deposit is one and a half times one month’s rent.

In no circumstance can the security deposit for a mobile home exceed two months’ rent.

Security deposits in California must be considered refundable. Lease agreements cannot contain provisions stating that the deposits are nonrefundable.

Can Landlords Charge an Additional Pet Deposit in California?

In California, landlords can charge a pet deposit, except for service dogs, psychiatric service dogs, and emotional support animals. However, the total security deposit cannot exceed two months’ rent for unfurnished units and three months’ rent for furnished units with some exceptions. Landlords cannot exceed the limit by giving them another name like “pet deposit” or “damage deposit”.

If a “pet deposit” is collected, it must only be used for damage caused by the pet. The state law does not prevent landlords from adding a monthly pet premium.

note

In some cities in California with rent control, the landlord may be required to petition their local rent board before adding a pet deposit to the security deposit of an existing lease, such as in Richmond and East Palo Alto. If your city has a rent board, check to see if a petition is required to add a pet deposit.

How Much Rent Can a Landlord Collect Upfront in California?

For lease terms longer than six months, landlords can collect six months’ rent in advance or more, but not less. For leases shorter than six months, landlords can only collect the first month’s rent plus the security deposit.

If the landlord collects rent in advance labeled as “last month’s rent”, it is considered part of the security deposit.

Security Deposit Collections in California

When collecting a security deposit, landlords in California must allow the deposit to be paid in a form other than cash or electronic fund transfer, and must document the condition of the rental unit so that a comparison can be made at the end of the tenancy.

Do Landlords Have to Provide a Receipt for the Security Deposit in California?

Landlords are not required to provide a receipt for the security deposit in California, although some states like Washington require a receipt.

What Obligations Do Landlords Have to Establish the Condition at Move-in in California?

California law does not have specific obligations before a tenancy. While other states like Washington have pre-tenancy obligations like a written inventory of damages, California does not.

Security Deposit Holdings in California

California law does not require landlords to hold security deposits separate from other funds. Some other states mandate how and where security deposits are held, but California does not.

Although some cities in California require that landlords pay interest on security deposits, they allow the landlord to choose how and where the security deposits will be held to gain interest.

Are Tenants Entitled to Interest on Their Security Deposit in California?

California law does not require landlords to provide interest on held security deposits, but some cities within California require that landlords pay interest including BerkeleyLos AngelesSanta Cruz, and San Francisco.

Check your local laws to determine if tenants are entitled to interest on their security deposits in your area.

How Are Security Deposits Accounted for in California?

Security deposits are not considered taxable income when they are collected.

What Happens to a Security Deposit When the Property is Sold in California?

When a property is sold in California, the landlord must either transfer the security deposit to the new owner and handle it according to the same rules or return the security deposit to the tenant minus any allowable deductions.

Prior to the sale, the landlord must provide the new owner with a written statement containing the following information:

  • The amount of the security deposit (after deductions)
  • An itemized list of deductions made
  • Whether they transferred the deposit to another account or returned it to the tenant

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