Why Is A Residential Security Deposit Important?

Security deposits play a role of great importance in any residential tenancy. In most cases, the landlord is renting a residential dwelling unit he or she owns to a stranger about whom the landlord may know only what is included in the tenant’s rental application. (Nowadays, landlords also research publicly available information on the Internet, including social media profiles, about their prospective tenant.) In any event, a residential tenancy is often between two parties who have never previously done business with each other.
The security deposit is a way for landlords to mitigate their risk of the unknown. In other words, security deposits protect landlords from tenants who default on their legal obligations.
Landlords often rely on their residential rental property income to pay their own rent or mortgages or to pay for repairs to one or more rental units. A loss of rental income could result in dire financial consequences for landlords in these situations.
Similarly, the wrongful withholding of a residential security deposit by a landlord can result in dire financial consequences for the tenant. Moving is expensive and tenants very often leave one rental unit for another.
Tenants in these situations may rely on the return of the security deposit from the rental unit they are leaving to cover expenses associated with the rental unit they are moving into.
Under California law, landlords may use a residential security deposit “for any purpose.” Cal. Civ. Code § 1950.5(b). However, the law also outlines four specific applications of a tenant’s residential security deposit by a landlord:
(1) For any unpaid at the termination of the tenancy (such as the last month’s rent, if unpaid),
(2) For any damage to the rental unit caused by the tenant or his or her guest beyond “ordinary wear and tear,”
(3) For any cleaning costs necessary to bring the rental unit to the same level of cleanliness as when the tenant first moved in, and
(4) If the lease permits it, for restoring, replacing, or returning personal property (e.g., refrigerators, stoves, etc.) or appurtenances (e.g., fans, window shades, automatic garage doors, etc.) beyond “ordinary wear and tear.”
California renters reading this law often ask what “ordinary wear and tear” means. Unfortunately, this phrase is not defined, leaving it to the landlords and tenants to decide for themselves. That said, minor carpet stains, discoloring of the wall, minor nail holes in the wall probably fall under ordinary wear and tear. (However, an aggressive landlord could take the position that all fall beyond ordinary wear and tear.) Similarly, large, gaping holes in the wall, broken windows, and removed/damaged door handles most likely fall outside ordinary wear and tear. Again, reasonable landlords and tenants can disagree as to who should be financially responsible.
California’s residential security deposit law sets forth some basic limitations as to the amount a landlord may demand. In addition to any rent for the first month paid on or before the move-in date, a California landlord can ask a residential tenant for a security deposit equivalent to two months’ rent if the rental unit is unfurnished and equivalent to three months’ rent if the unit is furnished. See Cal. Civ. Code § 1950.5(c). Two or three months’ rent in addition to the first month’s rent can represent a substantial financial burden for many renters. It is therefore of utmost importance for renters to understand tenant rights as they relate to the security deposit to ensure they can recoup as much of it as possible when the renters eventually move out.

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