Security Deposit

Security Deposit

Security Deposit

One of the first transactions between a landlord and a tenant is collecting the security deposit. A security deposit serves to protect the landlord in the event a tenant breaks or violates the terms of the lease or rental agreement. It is used to cover damage to the rental property, cleaning, key replacement, or unpaid rent. Most landlords collect a security deposit in addition to the first month’s rent at the time of move-in. Keep in mind, most states limit how much a landlord can charge for a security deposit.

There are a few aspects of rental property management that appear more straight forward than collecting a security deposit. After all, it’s just a matter of asking for the set amount of money that a landlord believes will help cover any damages that may occur right? Unfortunately, it is not that simple. In fact, taking the security deposit for granted is one of the biggest mistakes landlords make. From how much to charge to what a security deposit covers, knowing how they work is important.

Security Deposit Limits

State statutes issue laws about how much a landlord can collect for a security deposit. While some states have no limit, others allow a landlord to collect an amount equal to one month’s rent. In California, the security deposit limit is two month’s rent for unfurnished properties and three months if the rental is fully furnished. In some cities, particularly those with rent control additional requirements may apply such as paying interest on security deposits.

Where ever your rental property is located, it is important to check the current requirements. Remember, that your city or county, particularly if your rental property is covered by rent control, might have different landlord-tenant and security deposit laws than those at the state level.

Security Deposit

Security Deposit Use

Generally speaking, a landlord can only hold deposit monies for actual damages, material or financial. In other words, a landlord can deduct money to cover past due rent, or for damages beyond normal wear and tear (as in excessive). This includes charging for any cleaning or repairs that are necessary to restore the rental until to its condition at the beginning of tenancy. 

Things like water damage to a floor, broken tiles on a kitchen counter, or cigarette burns in the carpet would all be considered excessive damage. Especially when a detailed move-in checklist, photos, as well as videos capture the rental unit, as it was prior to the tenant moving in. A worn down area of carpet or small nail holes in the wall are not excessive damage.

Charges A Landlord Can Deduct from the Security Deposit

According to the Judicial Council of California, a landlord can deduct the tenant’s security deposit for:

  • The cost of cleaning the unit when the tenant moves out
    • But, only to make it as clean as it was when the tenant moved in
  • Unpaid rent including rent owed if tenant does not give proper notice when he or she is moving out
  • The cost of fixing any damages to the property caused by the tenant or tenant’s guest

Defining Normal Wear and Tear Vs. Damage

Normal wear and tear is the physical deterioration that occurs with normal use of the rental property. Normal wear and tear generally excludes a tenants’ or their guests’ negligence. This includes carelessness, accidents, or abuse of a rental property. What normal wear and tear is or is not, can often be difficult to define. For this reason, we offer some examples below:

  • Normal: faded paint
  • Excessive Damage: drawings, or crayon markings on walls
  • Normal: carpet faded or worn thin from walking
  • Excessive Damage: holes, stains, or burns in carpet, food stains, pet urine stains, or stains from drinks
  • Normal: scuffed varnish on wood floors from regular use
  • Excessive Damage: chipped or gouged wood floors, or excessive scraps from pet nails

Unpaid Rent: Breaking The Lease & Nonpayment of Rent

A landlord may keep all or part of a security deposit to cover unpaid rent. Additionally, if a tenant breaks or violates the lease, a landlord can keep all or part of the security deposit. However, this is highly dependent on the terms of the lease and the applicable state laws. Whatever your security deposit terms are, it is important to clearly state them in your lease agreement.

Avoiding Security Deposit Disputes

The best way to avoid a security deposit dispute is to inspect the rental property prior to move-in and during move-out. Keeping records of the condition of the rental property with checklists, photos, and videos (proof of the condition of the rental property prior to move-in) can help resolve issues. That’s because, most disputes over security deposits come down to what constitutes normal wear and tear. Additionally, proper maintenance and clear tenant expectations can help prevent wear and tear from turning into damage. And, it also reduces your chances of a security deposit dispute.

Hire A Property Management Company

While there is a level of protection in security deposits, handling them improperly can lead to troubles for landlords. To avoid unnecessary lawsuits and ensure you stay within the laws governing your security deposit policies, hire a property management company. We will perform a move-in and move-out inspection with detailed pictures, videos, and a signed document to ensure you are covered!

So, whether you are interested in changing property managers, or simply looking to hire a property management company for the first time, we can help. We take care of all types of residential properties including homescondos, multiplexes such as duplex and triplexes, and even small apartment buildings. Let us manage your rental properties, so you can enjoy your life! Call us today at (858) 576-2176.