Security Deposits
Civil Code Section 1950.5 is the law governing security deposits for all units in California whether or not they are covered by rent control. Section 1950.5 does not address payment of interest on deposits, SF Administrative Code (Rent Ordinance) Chapter 49 does. Note that the security deposit law was changed recently.
California Civil Code Section 1950.5 states that a security deposit is limited to one month’s rent, regardless of whether the unit is furnished or unfurnished. The exception is if the landlord is a human being who owns no more than two residential properties that have fewer than four units for rent, or a limited liability corporation in which all members are human beings, they can charge up to two months rent.
There is no such thing as a non-refundable security deposit. No matter what it’s called–key deposit, last month’s rent, pet deposits, etc.–all the money you pay above your first month’s rent is refundable. A provision in a rental lease that represents a deposit as non-refundable is not enforceable. If you give your landlord money to “hold” an apartment you are interested in renting, and then change your mind, it may be possible for the landlord to keep part or all of this deposit.
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Interest on Security Deposits
Chapter 49 of the San Francisco Administrative Code requires landlords to pay interest annually on deposits held over one year, regardless of what the deposit is called.
Interest payments apply to all residential rental units in San Francisco, including those exempt from the Rent Ordinance, with one exception: where the rent for the unit is assisted or subsidized by a government agency, the interest payment requirement does not apply.
Interest must be paid every year on the tenant’s “annual due date.” For tenancies beginning after September 1, 1983, the annual due date is the same day and month the landlord received the deposit from the tenant. (If the tenant moved in and paid a deposit before September 1, 1983, interest was due on September 1, 1984 and every September 1st thereafter.)
If the tenant vacates before one full year of occupancy, no interest is due. Where a tenant vacates after one year of occupancy but before the next annual due date, the interest payment for the partial year period must be pro-rated and calculated using the interest rate in effect on the date the tenant vacates.
Here’s how to calculate the amount of interest on a Security Deposit that is owed to you.
Getting Your Deposit Returned
Landlords have 21 days to return security deposits after you turn in your keys (on the final day of your 30-day notice). If all or part of your deposit is being withheld, your landlord must send you a written, itemized statement, within 21 days, listing the reasons why the amount is being withheld from your deposit and showing what they spent it on. A landlord can deduct for damages, but not for normal wear and tear. Click here for Nolo.com’s description of the difference between damage and normal wear and tear. One example we always use to distinguish is: The drapes are there when you move in and you live there ten years. The sun beats down on the drapes every day. By the time you leave, the drapes are faded, but it’s not your responsibility, it’s the sun’s. On the other hand, if your cat uses the drapes or the rug as a scratching post for ten years, then you are responsible.
Stubborn Landlord
If your deposit is not returned to you within 21 days, or if you do not agree with the amount that has been withheld, or if your landlord has not paid you interest: Send a letter to your landlord requesting the money and refer to the security deposit law California Civil Code 1950.5. (San Francisco Administrative Code Chapter 49 for non-payment of interest). Keep a copy of all correspondence. If your landlord does not respond within a reasonable time, you can sue in Small Claims Court (see info below).
Small Claims Court is like those court programs on TV. No lawyers are allowed. You and your landlord will both have an opportunity to present your cases. You should bring all written documentation, inspection reports, rental agreements, receipts for deposits paid, and photos that will help prove your case. You can sue your landlord for statutory damages of twice the amount of deposit for bad-faith retention of the deposit: CA Civil Code 1950.5 (l). The maximum you can sue for in Small Claims Court is $12,500. For more information, call or drop in at the Access Center, 400 McAllister, Room 509, (415) 551-5880.
Upon Move-In
Get a receipt for your deposit. When you move in, take careful inventory of the condition of the place. Record any damage and check all equipment to ensure that it works properly. If possible, take photos of existing damage to ensure that you will not be blamed for it. Have the landlord or manager sign and date your inventory list and keep a copy.
Increasing Deposits During Tenancy
Sometimes a landlord will try to increase the amount of money you have on deposit during your tenancy. State law does not address this issue. Check your lease. If you have a fixed-term lease, the landlord may not raise the security deposit unless the lease allows for it. If the security deposit already adds up to whatever you were required by law to pay at the time, then the security deposit may not be increased.
Sale of Premises
Landlords who sell their buildings are required to either transfer the security deposits to the new owner or return the deposits to their tenants. If a deposit is transferred to the new owner, the old landlord must give the tenant a document stating the amount of the transfer and the new owner’s full name and address.
Moving Out
Whether you are on a month-to-month tenancy or at the end of a fixed lease, the law requires that you give a thirty-day written notice before you move out. If you have not paid last month’s rent ahead of time, you should pay it with your notice. If you move out without giving notice, your landlord may be entitled to deduct “unpaid rent” from your deposit. If you move out without giving notice and the apartment is re-rented right away, the landlord must return your rent from the time that a new tenant occupies the apartment. CA Civil Code 1950.5 mandates that a landlord notify a tenant of the option of having an initial inspection two weeks before terminating a premises in order to identify problems (and possible deductions from the security deposit) and be given a chance to rectify them and avoid any deduction.
A practical example of this: Tenant Juan gives landlord Jill a 30-day notice that he is leaving March 1. Within a reasonable time after receiving the notice, Jill should contact Juan in writing and schedule an initial inspection at which Juan can be present. If Juan agrees, the inspection happens (no earlier than two weeks before the end of the tenancy and with a 48-hour notice) and Jill gives Juan an itemized list of what problems exist. Juan then has time to fix the problems and avoid deductions. Then, before he leaves, Jill walks through with him again and signs off on the repairs he has done.
Last Month’s Rent
If you were required to pay for the last month’s rent before moving in, check your lease to determine what you have actually paid for. If the lease says “security for last month’s rent,” then you have not actually paid for the last month’s rent, but just provided security for it, and must pay your rent on time as usual. If the rent has been raised, you must pay the difference between the final rent and the security for last month’s rent. If the rental agreement simply says “last month’s rent,” then you have paid for last month’s rent and do not have to pay it again. You’re not responsible for the differential amount caused by a rent increase.
Deposit For Last Month’s Rent
If part of your deposit was not specifically for last month’s rent, then you are required to pay rent for the last thirty days you live in the apartment. Write a letter to your landlord a month or two before you leave asking them if you could apply your deposit towards last month’s rent. Offer to have the landlord inspect the apartment for damages before you move out. If the landlord refuses, then pay the last month’s rent.
If you have to file in Small Claims Court, you should know that it is relatively simple. No attorneys are allowed. The best comparison is to one of those TV court programs. You present your case, the landlord presents theirs. The judge decides. Small Claims can be used for a whole host of tenant problems, including decrease in services, illegal rent increases, etc. To file, go to the courthouse at 400 McAllister St./Polk during regular business hours or check the superior court website online. The cost of filing for Small Claims is based on how much you’re suing for, up to $75. The court offers fee waivers if you are low-income. So you should ask for them. For help with filing in Small Claims, check out the Access Center.