Imagine renovating your new property, creating beautiful interiors, and listing it on a real estate website for rent. So far, so good. But let's fast-forward a year. You return to that property to find walls damaged, furniture broken, and a tenant behind on the rent.
It might sound like a worst-case scenario, but like most risks, it's worth planning for every eventuality. One way to do that is through security deposits. Here's what you need to know about how this works in California.
How Much Is a Security Deposit?
For California rental properties, there is a limit to what landlords can charge new tenants for a security deposit. Overlooking this rule could result in legal problems.
If your property is unfurnished, you can charge a maximum of one month's rent. However, you can extend that for a fully furnished property.
There Is a Deadline for Returning a Deposit
When a tenant leaves your property, there is a deadline for returning their security deposit. In California, that's 21 days.
If you don't return the deposit at that time, the tenant can make a legal claim against you to recoup the money. In this case, it will be too late for you to deduct money to cover damages or unpaid rent.
Thus, always ensure you start the clock when a tenant's lease agreement ends.
Landlord Rights: Allowed Deductions
Another law to note is allowable deductions. You can't deduct money for a deposit for anything you deem acceptable. It has to follow the law and reflect your lease agreement.
Typically, that includes nonpayment of rent, breaking the lease agreement, or property damage. But you can't deduct money for everyday wear and tear you'd expect when the tenant has lived in your rental.
Rules on Returning Interest Earned
When you hold a tenant's security deposit, you may earn interest on that money, depending on where you store it.
In some US states, you must return this interest alongside the security deposit when your tenant leaves the property. However, in California, you don't need to.
That means your security deposit calculation is far more straightforward.
Landlord Responsibilities for Inspections
Tenants are entitled to an inspection before they move out. This gives them a fair chance to have the property inspected while they still live there in case there are deductions later.
This inspection also allows the tenant to remedy any violation before they see part of their security deposit deducted. It's the most transparent and fair process.
Itemise Any Deductions
You must outline why you intend to deduct any money from the security deposit. The best way to do that is to provide an itemized list. Where possible, provide supporting evidence, like photos.
That will reduce the chance of disputes and help defend your case if the tenant tries challenging the deductions in court.
Protecting Your Californian Rental With Security Deposits
Don't feel worried about asking for security deposits from new tenants. Remember that it's there to protect you and your investment. Use this guidance to ensure you take the correct legal steps.
At HBR Rentals, we focus on getting you the best return for your property investment in California - all while delivering exceptional customer service. If you'd like to learn more, contact us here.
