Key Takeaways
California Limits How Much You Can Collect: Most landlords can only charge a maximum security deposit of one month’s rent, with higher amounts allowed.
Only Certain Deductions Are Allowed: Landlords may deduct for unpaid rent, cleaning, and tenant-caused damage beyond normal wear and tear.
Strict Timelines and Rules Apply: Security deposits must be returned within 21 days, along with an itemized statement for any deductions.
California’s landlord-tenant laws allow landlords to collect a security deposit from new residents and as an experienced property owner, you already know how valuable this protection can be.
A properly collected and managed deposit can help you recover costs related to unpaid rent, excessive cleaning, damage beyond normal wear and tear, unpaid utilities in the resident’s name, or even losses caused by an unexpected lease abandonment.
However, while security deposits offer essential financial protection, they also come with strict legal requirements.
California imposes clear rules on how much you can collect, what you’re allowed to deduct, and when the deposit must be returned.
Failing to follow these regulations can lead to penalties, disputes, and unnecessary legal trouble.
To help you stay compliant and protect your investment, HCM Property Management has put together this comprehensive guide on the fundamentals of California’s security deposit laws.
Whether you self-manage or work with a professional, understanding these requirements is key to running a smooth and legally sound rental operation.
Maximum Security Deposit Limit
In California, landlords are generally limited to collecting a security deposit equal to one month’s rent.
Recent updates to state law changed previous limits, so it’s important for landlords to understand that one month is now the standard maximum in most situations.
However, California does allow higher deposits in very specific cases. You may collect up to two times the monthly rent if all of the following conditions are met:
You own no more than two rental properties, with a combined total of four or fewer units.
You are the sole owner of the property or hold it through an LLC.
The resident is not an active member of the armed forces.
If these conditions apply, you may legally request a higher deposit amount.
Additional Pet Deposits
California landlords may charge an additional pet deposit for residents with animals except for assistance animals, which are not considered pets and must be accommodated without extra fees.
That said, the total security deposit (including any pet-related amount) cannot exceed the state’s maximum, which is typically one month’s rent for most landlords.
Pet deposits can be used to cover any animal-related damage beyond normal wear and tear.
As an alternative to a pet deposit, you may also choose to charge a monthly pet premium added to the rent.
This fee is separate from the security deposit and is commonly used to help offset potential pet-related wear on the unit.
Storing Security Deposits in California
At the state level, California does not require landlords to store a tenant’s security deposit in a separate account or in an interest-bearing account.
Landlords may keep the deposit in any type of account, and commingling with personal funds is not prohibited under state law.
However, several California cities have local ordinances that do impose stricter rules.
Cities such as Los Angeles, San Francisco, Berkeley, and Santa Cruz require landlords to place security deposits in interest-bearing accounts, and in some cases, they must pay interest to tenants annually.
These local rules override the state’s general flexibility.
Sale of Rental Property in California
If you sell an occupied rental property, California Civil Code §1950.5(g) outlines your responsibilities. You must do one of the following:
Transfer the tenant’s security deposit (minus any lawful deductions) to the new owner and notify the tenant in writing, OR
Return the deposit directly to the tenant, minus any lawful deductions, and notify them you have done so.
Once transferred, the new owner becomes legally responsible for holding and eventually returning the deposit according to California law.
Security Deposit Deductions (and What Counts as Damage)
Under California Civil Code §1950.5, landlords may deduct funds from a resident’s security deposit only for specific, legally allowed reasons.
These include:
Unpaid rent owed at move-out.
Cleaning costs needed to return the unit to the level of cleanliness it had at move-in.
Repairing tenant-caused damage that goes beyond normal wear and tear.
Restoring or replacing items damaged by the resident if permitted under the rental agreement.
To understand what qualifies as a lawful deduction, it’s important to distinguish between normal wear and tear and damage:
Normal wear and tear refers to the gradual, expected deterioration of a rental unit over time are not deductible.
Damage is caused by negligence, misuse, or abuse are valid reasons for deductions because they exceed ordinary use.
By clearly documenting the unit’s condition at move-in and move-out, landlords can ensure compliance with California law while avoiding unnecessary disputes.
Security Deposit Returns
In California, security deposits must be returned within 21 days after the resident moves out.
If you make any lawful deductions, you must provide the resident with an itemized statement detailing each charge and include any remaining balance of the deposit.
This notice must be delivered either in person or mailed to their last known or forwarding address. Residents also have the right to request a pre-move-out inspection.
If requested, you must walk through the unit with them before the tenancy ends, point out issues that could lead to deductions, and allow them the opportunity to correct or repair those problems before they vacate.
This helps minimize disputes and ensures full compliance with California law.
Bottom Line
Understanding California’s security deposit laws is essential for protecting your rental business and avoiding costly disputes.
Even minor violations can result in serious penalties.
In California, withholding a deposit unreasonably or in bad faith can lead to damages of up to twice the deposit amount, plus potential court costs and attorney fees.
If you need guidance or want to ensure full compliance, HCM Property Management is here to help.
We proudly serve rental property owners throughout offering expert support and reliable property management services. Contact us today to learn more!
