How to Avoid Security Deposit Disputes in California

The biggest and most common issue between landlords and tenants are by far late or nonpayment of rent. The handling of security deposits are a very close second. Most of the issues lie in how landlords and tenants each think they work or what they’re for. The fact is these two ideas or concepts are on complete opposite ends of each other. This article will explain the pretty industry standard guidelines and procedures that are in place so you can avoid security deposit disputes in the future.

The state of California, along with every other state in the US, sets a limit on how much you can charge for security deposits. You can find all of the relevant information on California security deposits here. It’s astonishing at what rate legal action needs to be used to settle these types of disputes. Here are some tips on how to try to avoid this.

Security deposits in your rental agreement

Having a strong and very well written lease is one of the best business decisions you’re ever going to take as a landlord. Don’t try the free route or cheap way here either. It’s important to hire a landlord attorney to really round out the edges and make it lock tight. Investing in a solid rental agreement with a well detailed security deposit clause can save you tons of money and time later! When drafting your lease, pay special attention to:

• Exact dollar amount for the concept of security deposit
• Define normal wear and tear
• The logistics. How and when you will be refunding your tenant after move out
• Under what circumstances can you use the security deposit
• How will you handle, if any, disputes in the future avoiding legal action

Inspect your properties

Another good clause to add to your lease is mentioning the need to inspect the rental unit at least twice a year. You don’t have to tell the tenant that you are doing it to avoid future disputes. Instead, mention that, as a good business practice, you like to make sure the rental property is property maintained.

This tactic helps because the tenant will have the inspections in mind. Good tenants like to avoid confrontations too and they will feel like you care for their wellbeing by keeping the unit in the best living conditions possible. The last point to mention here is to make sure you take care of any maintenance requests quickly and efficiently.

Understand California’s guidelines for security deposits

Bookmark California’s security deposit guidelines and refresh your memory by giving it a read through every once in a while. This can help you avoid doing something you’re not supposed to do and avoid future court appearances! In California:

• You can charge 2 times the amount of rent for security deposits.
• You can charge 3 times if your rental unit is fully furnished.
• There is no limit on how much you can charge for commercial properties.

Once the tenant has moved out of your rental property

• You have 21 days from the date they move out to return part or the full amount of the security deposit to your ex-tenant.
• If you are deducting any amount, you must provide a letter to the ex-tenant explaining the deductions along with a detailed, itemized list.
• You must provide your ex-tenant with copies of receipts or invoices of the repairs.

Reasons you can use part or all of the security deposit

• If your ex-tenant made no effort to leave the rental unit clean, you can deduct the cleaning costs, minus normal “wear and tear”, but cannot use more than it would take to get the rental to the state it was at time of tenant move in.
• You can use the security deposit to cover damages cause by tenants and or guests.
• Landlords can use the security deposit to cover rent balances left by the tenant.
• You can use the deposit to pay outstanding utility bills like water, electricity, etc.

Consider making checklists

Implementing move-in and move-out checklists as part of your business is important. This is a great way to create healthy relationships with your tenants. The tenants will feel responsible for making sure they leave the rental property the same way they first walked through with you. It also gives them a sense of trust, transparency and it makes you look like a pro! Make notes of “special” areas that become common problematic issues such as areas around bathtubs, high traffic areas if you have carpet, etc.

During your walkthrough, make sure you take pictures of how the rental unit looked the day you went through the checklist with your tenant. Make sure the date stamp is enabled! Once the tenant has no additional questions, sign and date the report, hand them a copy along with some tips on how they could keep their rental unit clean!

When it comes to moving out, make sure you remind your tenant that the move out report is mandatory! Remind them that you as a landlord legally have 21 days to return the deposit.

The more you know about how security deposits work in California, the better you’ll be at avoiding disputes. We’d like to close by recommending you always communicate with your tenant, use common sense and to remember to treat everyone how you’d like to be treated.