Well, it’s that time of the year again: school is back in session. Normally around this time of year, students and families are entering into new leases and moving into new housing. Anyone that has rented a home has usually encountered paying a security deposit. Here is a quick refresher on what a security deposit is and what landlords can charge under California law.

What Is a Security Deposit?

A security deposit for a residence in California is broadly defined as “any payment, fee deposit or charge … that is imposed at the beginning of the tenancy to reimburse the landlord for costs associated with processing a new tenant or that is imposed as an advance payment of rent .…” (CA Civ. Code § 1950.5(b)).

What Can a Security Deposit Be Used For?

Under California Civil Code § 1950.5(b), a security deposit can be used by a landlord for a number of purposes:

  • Unpaid rent
  • Repairs for damages to a rental unit
  • Restoring a rental unit to the level of cleanliness it was in when the tenant first received the unit
  • Restoring personal property that was included with a rental unit when the lease specifies a deposit can be used for that purpose

Can a Security Deposit Ever Be Non-Refundable?

A landlord is prohibited from characterizing a security deposit as non-refundable per California Civil Code § 1950.5(m). A landlord is only entitled to keep amounts of a security deposit for the purposes mentioned above and under California Civil Code § 1950.5(b).

Maximum Amounts Landlords Can Demand from Tenants before Lease Begins

In most situations, a landlord is limited in the amount of security that can be collected from a new tenant. California law limits what can be collected from a tenant based on whether a rental unit is furnished or unfurnished and whether you have a waterbed.

Unfurnished Units: A landlord can charge (1) an application screening fee, (2) first month’s rent, or (3) any amount up to two month’s rent as a security deposit. If you have a waterbed, a landlord is allowed to charge a security deposit up to two and a half times the monthly rent. (CA Civil Code §§ 1940.5(g); 1950.5(c); 1950.6).

Furnished Units: A landlord can charge (1) an application screening fee, (2) first month’s rent, or (3) any amount up to three months’ rent as a security deposit. If you have a waterbed, a landlord is allowed to charge a security deposit up to three and a half times the monthly rent. (CA Civil Code §§ 1940.5(g); 1950.5(c); 1950.6).

Some Exceptions: Nothing prohibits a landlord from collecting advance rent from a tenant when (1) the pre-payment amount is for at least six months rent or more or (2) when the period of the lease is for six months or more. (CA Civ. Code 1950.5(c)).

Another exception is when the landlord and tenant enter into an agreement for the landlord to make structural, decorative, or furnishing alterations to a rental unit for the tenant. A landlord is permitted to charge any amount the parties mutually agree on to perform the alterations without it counting toward the security deposit limits mentioned above. (CA Civil Code §1950.5(c)). However, if the alternations the new tenant requests involve cleaning or repairing damage to a rental unit in which a landlord is entitled to use a security deposit to fix, these amounts are subject to the deposit limitations mention earlier. (CA Civil Code §1950.5(c)).

Quick Note about Application Fees

Under California Civil Code § 1950.6, a landlord is permitted to charge a prospective tenant a rental application-screening fee to cover the costs of obtaining information such as credit reports and verifying references. The fee a landlord can charge is limited to the actual out-of-pocket expenses incurred for obtaining the information. However, Civil Code § 1950.6 places a statutory limitation on screening fees of $30 plus adjustments for increases in the Consumer Price Index. (CA Civil Code § 1950.6(b). As of 2012, the maximum screening fee allowed in 2012 was $49.50. (California Department of Consumer Affairs: http://www.dca.ca.gov/publications/landlordbook/looking.shtml#creditchecks).

Stay tuned for the next part of our security deposit post. We’ll talk about collecting additional security during a tenancy, payment of interest on security deposits, and what happens to a security deposit once a tenant moves from the landlord’s rental unit.