Escrow Trust Advisors | The Ins and Outs of Security Deposit Refunds
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The Ins and Outs of Security Deposit Refunds

The Ins and Outs of Security Deposit Refunds

According to the California Department of Consumer Affairs, the biggest disagreement between landlords and tenants come after the tenant vacates the property, and it is often centered on the refund of the security deposit.  Knowing what the law will and won’t allow will go a long way to help you and your tenant avoid any misunderstandings at the end of the lease.

As outlined in California Civil Code 1950.5, landlords are allowed to use a tenant’s security deposit for one of four reasons:

  1. Unpaid rent.
  2. Cleaning – but only to return the unit to the condition the property was in on move-in.
  3. Repair of damages caused by the tenant or the tenant’s guests beyond normal wear and tear.
  4. And for restoration or replacement of furniture, furnishings, or other items (e.g. keys) beyond normal wear and tear (but only if the lease or rental agreement specifically stipulates).

Furthermore, the landlord is allowed up to 21 calendar days after the tenant’s departure to refund the tenant’s security deposit or to provide an itemized list of deductions from the original deposit amount, accompanied by a refund for what remains.  If deductions have been made from the tenant’s deposit, the law requires that the landlord provide copies of receipts (or good-faith estimates) for repairs or cleaning needed to bring the rental property back to “original” move-in condition.  Receipts must describe work performed, time spent, and hourly rate (it must be reasonable).  If estimates were provided initially, within 14 calendar days, a final statement should be provided to the tenant, detailing final costs, accompanied by a check for the remainder of the security deposit.

If a former tenant disputes the deduction(s), the best thing for the landlord to do is to objectively and expeditiously review the facts and reply.  Oftentimes, an open dialogue will help both parties avoid unnecessary stress and anxiety while also allowing them to resolve any differences quickly.

For more information about this and other landlord/tenant subjects, visit the California Department of Consumer Affairs website at http://www.dca.ca.gov.