When it comes to being a landlord, you never know exactly what you are getting yourself into when you welcome a new tenant into your rental property. Thankfully, there are things that you can do to help safeguard against the issues that might come up.
Requiring a security deposit improves the chance that you won't have to do too many repairs at the end of a tenancy. Screening your tenants can help to make sure you don't have issues that may require you to keep the security deposits for repairs or unpaid rent.
Continue reading to learn about tenant security deposits in California.
What Is a Security Deposit?
Security deposits are set amounts of money collected from a tenant after the signing of a lease. Landlords collect security deposits to cover the costs of any potential damage that a tenant may cause throughout their tenancy.
Is There a Limit on Security Deposits?
The limit placed on a security deposit varies from state to state and the ruling changes over time. You'll have to do your research to make sure you're following the security deposit law.
In California, the maximum depends on whether the rental property is furnished or unfurnished. An unfurnished rental can require a security deposit of twice the amount of the monthly rent. A furnished rental may be up to three times more than the monthly rent.
How Should You Store Them?
There are no specific laws for California security deposits stating how you must store your tenant's security deposit during their tenancy. They don't need to be held in a separate account. They don't have to be in an account that accrues interest over time.
Landlords in California aren't even required to give their tenants a receipt of security deposits. However, it's important to keep this information for your records.
When Can You Keep the Deposit?
Landlords have to have a legitimate reason for keeping a tenant's security deposit. Landlords cannot keep a security deposit for normal wear and tear on the apartment and it can't be used to fix an issue that occurred before their tenancy began.
You can keep the security deposit if the tenant default on paying rent or violate the rental agreement in any way. The deposit is meant to pay for any debts produced as a result.
You can also keep the deposit for repairs if the tenant caused damage to the property. It does, however, have to be for repairs beyond the normal wear and tear of living in the rental. Landlords can keep the deposit for professional cleaning costs to return the rental to the condition it was in when the tenant moved in.
You must make repairs to maintain the home during the tenancy to appease your tenant to prevent any legal action taken against you.
How Long Do You Have to Return Deposits?
Landlords have 21 days to return the security deposit to the tenant once their residency ends.
The deposit should be accompanied by an itemized statement that lists the amount of rent paid, any deductions needed, and how much they are returning to the tenant. The deductions may require proof of any work completed via documents and receipts. This paperwork can be for labor or materials.
Are Security Deposits Important?
Security deposits are so important! They are a way to ensure that you aren't caught in a financial nightmare when your tenants move out of your rental property. The promise of returning that money at the end of their tenancy means they might be more likely to take care of the property while they are living in it.
Contact Residential Equity Management today with any questions you might have about tenant agreements and security deposits. We look forward to working with you.