Return of Security Deposits

by | Aug 9, 2021 | Landlord Tenant |

Landlords often find themselves trying to figure out how to return a security deposit to a tenant that has already vacated. By the same token, a tenant is often eager to apply the remaining portions of their security deposit to a new rental. What follows is a snapshot of California’s legal obligations of landlords to return a security deposit to a former tenant.

Introduction

A security deposit is money a landlord receives from a tenant other than rent. The security deposit serves to protect the landlord in the event the tenant breaches the terms of a rental agreement. More likely, a security deposit is used to cover the cost of property damage, including cleaning or replacement of carpets, paint, keys, and other features. After making deductions, a landlord is obligated to return any remaining amounts of the security deposit to a tenant. This usually happens after the tenant has already moved, even in the situation where the landlord and tenant engaged in a pre-move out inspection. To understand more about pre-move out inspections, review Civil Code Section 1950.5(f).

Procedure for Returning a Security Deposit

First, a landlord shall furnish to a tenant within 21 calendar days after a tenant has vacated a leased premise, by personal delivery or by first-class mail, postage prepaid, a copy of an itemized statement regarding deductions from a security deposit and return of any remaining portion of the security deposit. Civ. Code §1950.5(g)(1). The landlord and tenant can mutually agree that the landlord will deposit any remaining portions of the security deposit electronically into a bank account or other financial institution as designated by the tenant. The landlord and tenant can also agree that the landlord will provide an itemized statement and copies of charges to an email address provided by the tenant.

The landlord, however, may still be left wondering how to get payment to a tenant that has already moved on. Not to worry, even if the tenant did not leave a new address, the landlord still has options that are compliant with California law and that are meant to ensure that the tenant actually receives payment.

Under Civ. Code §1950.5(g)(6), a landlord may mail payment in the manner described above (along with an itemized statement of deductions and copies for charges) to an address provided by a tenant, or if no address was provided to the landlord, to the unit that was vacated.

If the tenant has set up a forwarding address, they should receive the landlord’s correspondence and payment. If the landlord’s correspondence and payment is returned by the postal office, the landlord should keep (and make copies) of the unopened return envelope as proof that the landlord complied with its legal obligations.

Another issue a landlord may encounter is that there are multiple tenants entitled to the remaining portion of the security deposit. In this case, it is recommended that the landlord make payment jointly to all residents who have signed the lease. This will put the burden on the tenants to distribute the security deposit proceeds among themselves.

Consequences for Failing to Return a Security Deposit

If a landlord does not return the entire amount of a tenant’s security deposit within the 21 days required by law or if a tenant disputes the deductions from the deposit, the parties may find themselves in small claims court. Generally, small claims is the correct venue because possession in no longer at-issue and a security deposit will likely be within the small claims jurisdiction. Landlords should be aware that if they retain a security deposit in bad faith, they may be liable for up to twice the amount of the security (in addition to actual damages).
Closing Remarks

The outline above is intended to give both landlords and tenants an idea of how to navigate returning or receiving a security deposit after a tenancy has terminated. Since the return of a security deposit is normally one of the last transactions between a landlord and tenant, they should be careful to give each other the requisite information to conclude their business (i.e. new addresses, itemized statements, and charges).

Allen, Baker & Stephan, PC is a full-service real estate law firm representing residential and commercial property owners and managers. This article is for general information purposes only. While Allen, Baker & Stephan, PC provides general information on our website, the information contained herein is not an exhaustive recitation of applicable law and must not be construed as legal advice. Laws may have changed since this article was published. Before acting or if you encounter problems, be sure to contact our law firm (650-347-5000), we are more than happy to address your legal needs.

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