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Rules Governing Security Deposits, Amount & How They Are Held


I think one of the most misunderstood aspects of Tenant-Landlord relations are about the Rules Governing Security Deposits. Usually, a landlord will hold the equivalent of 1 ½ month’s rent as security on the lease. The maximum amount that a landlord can collect is two month’s rent. If the dwelling is furnished, an amount equivalent to three month’s rent is permitted. The landlord/broker cannot collect more than two month’s rent and designate it as a “pet deposit” (in addition to the “security deposit”).

Even if it is a month to month tenancy, a security deposit is still required. It is also required that the disposition of the funds be indicated in the Lease and the Property Management Agreement. They can be held by the landlord or the landlord’s agent; it is not required that the money be put in an interest-bearing account. If landlord and tenant agree, the security deposit may be placed into an interest-bearing account for the benefit of the tenant. The account must be in the name of the broker as trustee for the landlord and must be federally-insured. CAL. Bus. & Prof Code 10145(d)(1). None of the interest can be retained by the broker or the landlord.

Stay tuned for more information about Landlord Tenant requirements.

Next Blog: What are the restrictions for deducting money from the security deposit when the tenant vacates the dwelling?


Posted by: Sue Carrell and Associates on March 31, 2014
Posted in: Uncategorized