Navigating the complexities of rental property laws in Los Angeles County and throughout California can be a challenge for any landlord, no matter how experienced you might be. Security deposits can be especially difficult, because at the end of the lease term, it’s up to you to decide who much of that deposit your tenant is getting back. There could be disputes and disagreements. There could even be legal challenges.
As your local Los Angeles property management resource, we work hard to stay up to date on security deposit law. We follow relevant court cases and we constantly improve our own process to ensure that we’re compliant with the laws while protecting your investment and your bottom line.
Let’s review some of the basic concepts surrounding security deposits: specifically what the limits are when you collect them, when they have to be returned to your tenants, and why you might be permitted to keep them.
Collecting the Security Deposit: California Limits
You are permitted to collect a security deposit that’s up to the equivalent of two months’ rent when you’re renting out an unfurnished Los Angeles property. When your rental home is furnished, your security deposit can be up to three times the amount of rent.
The security deposit, you must remember, is always the tenant’s money. You are holding it to protect yourself against the risk that your tenant may damage your property or break the lease and leave before the lease term expires.
That’s the current law.
Recently, California’s governor signed AB 12, which limits the amount you can collect to the equivalent of one month’s rent – whether your property is furnished or unfurnished. This new law will go into effect in July of 2024.
There is an exception. If you do not rent out more than two properties and a total of four rental units, you can request up to two month’s rent as a security deposit.
Returning the Security Deposit in Los Angeles County
The changing law around security deposit limits is important. However, if there are going to be difficulties with your tenant’s security deposit, those difficulties will usually show up at the end of the lease, when the tenant is moving out and likely expecting to get a full refund of their deposit.
Several things are required of you before the move-out and the security deposit return.
- Offer a Pre-Move Out Inspection
California law requires that you offer your tenants a pre-move out inspection two weeks before they leave so that you can discuss any damage that appears in the property and what they’ll have to do to get their security deposit back. A lot of landlords dread taking the time to do this inspection, but a lot of tenants don’t bother with it. That’s a shame because it’s actually a good idea for you and your residents. When you can get together and walk through the home, you’ll have the opportunity to discuss where deductions may be found. The tenants will have an opportunity to right any wrongs and increase the likelihood that you’ll be able to return their full deposit.
- Conduct a Full Inspection Once Tenants Vacate
Once the tenants have moved out of your Los Angeles rental property, you’ll need to go inside and conduct a full inspection of the empty home. If you did manage to conduct a pre-move out inspection, you can see whether the tenants took any of your suggestions to make repairs and replacements. If this is the first time you’ve seen the home since you rented it out, you may be in for some surprises.
Take detailed notes as well as photos so you can document any damage or potential charges to that security deposit.
What kind of deductions can you make? This is where it’s critical to understand the difference between damage and wear and tear.
In California, security deposits can be charged for tenant damage, but any wear and tear issues are the responsibility of the landlord.
Wear and tear looks like:
- Small nail holes in the walls from where pictures and clocks were hung.
- Scuff marks on walls and floors from furniture.
- Worn carpet in high traffic areas.
- Caulk peeling away from tiles and tubs.
- Faded paint from sunlight or age.
Wear and tear is the general deterioration that any property takes on during a residency. It’s expected and ultimately your responsibility, financially. You’ll take care of these things during the turnover period anyway, to prepare the property for a new tenant.
Damage, however, is caused by tenants intentionally or accidentally. It’s the result of abuse, misuse, or neglect. Large holes in the walls from mounted televisions could be considered damage. If you find a cabinet door dangling from its hinges, you’re looking at damage. Writing on the walls and tears or stains in carpet or flooring would qualify as damage.
If you’re not sure how to separate the damage from the general wear and tear, reach out to a Los Angeles property manager. It’s not worth making a legal mistake just because you want to hold onto as much of the deposit as possible.
- Reasons to Hold Money from the Deposit
You can keep any funds required to repair or replace damaged items in the home. Make sure it’s well-documented, and keep any receipts and invoices for the work. The other reasons that you can withhold money from your tenant’s deposit are:
- Unpaid rent or utilities. Maybe your tenant’s didn’t pay a full month’s rent and there’s an outstanding balance. Perhaps they have late fees that were never collected or you cannot turn the utilities back on into your own name because the tenants left with an outstanding balance. You can charge the deposit.
- Cleaning fees in order to restore the property’s cleanliness to the state it was in when tenants took possession.
- Hauling fees if tenants left possessions or trash behind.
- Restoring the property to the way it looked before move-in. For example, if your tenants painted walls a bright blue color and did not return those walls to the neutral shade that was there when the home was rented, you can charge for the re-painting.
- Lease breaks. If your tenant leaves the property without notice before the end of the lease term, you can put the security deposit towards the lost rent and other expenses you’ll incur.
Keep what you’re entitled to keep but make sure it’s all documented. Check your lease agreement too, because that will also point to the authority a landlord has to withhold security deposit funds.
Los Angeles County Security Deposit Timing
You have 21 days from the tenant’s move-out date to return the security deposit and/or a disposition letter.
Send any remaining security deposit that is owed to them to their last known address. Hopefully, they left a forwarding address with you. If not, you’ll have to send it to their previous address, which is likely your rental property.
If you made deductions, make sure there’s an itemized list of what you withheld and why. You’ll need accounting that reflects the unpaid late fees you might have charged to the deposit as well as any damage that was fixed in the home.
If you’re not able to make all the necessary repairs within those 21 days, you have to send a Good Faith Statement with an estimate of what those repairs will cost. This isn’t generally necessary, especially if you have a good team of vendors who can make your repairs quickly.
Avoiding Security Deposit Disputes
Avoid disputes by pushing for the pre-move out inspection. Avoid disputes by remaining detailed in your accounting.
We’re just as eager to refund a full security deposit amount; when we can return a tenant’s full security deposit, it means that property is in excellent condition and we can get it back on the market faster. Everybody wins.
Teaching your tenants how to get that deposit back will absolutely reduce the number of disputes you receive from tenants who are moving out. It will improve the chances that they get their money back and it will reduce the time and the expense of your turnover.
Security deposits can be a struggle because we’re talking about the tenant’s money and your investment property. Remember that this isn’t about what you’re owed or what your tenant is entitled to. It’s about following California’s strict security deposit laws.
We can help you avoid potential problems with security deposits and ensure you’re complaint with the new laws coming into effect. Let’s talk about your Los Angeles County rental property needs. Contact us at El Camino Property Management.
Please note this information is deemed reliable, but not guaranteed. Please consult appropriate professionals for specific situations.
