Landlord Holding Security Deposit Funds in California

Deductions generally cover unpaid rent, tenant-caused damage beyond ordinary wear, and cleaning needed to restore the original level of cleanliness. The agreement may also authorize qualifying charges for furnishings or other personal property.

In landlord-tenant disputes, faded paint differs from a burn or broken fixture. Replacement charges should account for age and remaining useful life rather than automatically charging for a new item.

The unit’s condition at move-in provides the baseline. A landlord cannot charge the departing tenant to correct earlier damage or leave the unit cleaner than it originally was. Records of prior repairs and installation dates help distinguish a tenant’s responsibility from routine turnover expenses.

Subject to statutory exceptions, landlords must notify tenants of their right to request a pre-move-out inspection. If requested, it generally occurs during the final two weeks, allowing tenants to address identified conditions.

Move-in photos are mandatory for tenancies starting on or after July 1, 2025. Since April 1, 2025, landlords must also photograph conditions before deductible repairs or cleaning and after completing that work. Required photos must accompany the deduction accounting.

Photos should connect the claimed damage to a specific location and completed repair. A close-up may show a stain without establishing how much carpet needed treatment. Inspection notes and invoices should explain the scope and cost of the work.

Contractor charges generally require invoices or receipts. Landlord or employee labor requires a work description, time spent, and a reasonable hourly rate. Materials require supporting cost records.

A good-faith estimate may apply when qualifying work cannot reasonably finish within 21 days or an outside invoice remains unavailable. Final accounting, supporting documents, and any additional refund are due within 14 calendar days after completion or receipt of the missing invoice, as applicable.

The statement should distinguish actual expenses from estimates. If the final charge is lower, the landlord must return the difference. A general label such as “repairs” leaves both the work and its connection to the tenant unclear.

An exception to providing certain cost documents applies when combined repair and cleaning deductions do not exceed $125 or after a valid statutory waiver. The itemized statement remains necessary. Tenants may request the cost documents within 14 calendar days after receiving it; landlords then have 14 calendar days to respond.

Since January 1, 2026, electronic receipt of rent or the deposit generally requires an electronic refund unless the parties agree otherwise in writing. Written notice, account designation, and statement-delivery requirements also apply.

Keep delivery records for both the accounting and refund. Proof of a transfer establishes payment, but does not establish that the landlord supplied the required deduction statement or supporting documents.

San Francisco generally requires simple interest on residential deposits held for at least one year, subject to exceptions. Check the property’s applicable ordinance for coverage, rates, and payment dates.

Missing the accounting deadline can defeat the right to retain the deposit without necessarily eliminating separate damage claims. Bad-faith retention may support actual damages plus statutory damages of up to twice the deposit. In a landlord lawsuit, that additional award depends on the evidence rather than disagreement alone.

The outgoing owner generally must transfer the remaining deposit to the successor with required notice or return it after lawful deductions. A sale does not cancel the tenant’s deposit rights.

A residential lease cannot make a security deposit nonrefundable. Calling the payment a cleaning or damage deposit does not permit automatic forfeiture.