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How to be a Landlord in San Diego: Security Deposit Requirements

System - Friday, April 26, 2013

Today, we are talking about security deposit requirements that San Diego landlords must remember when renting out a home. As a landlord, it is critical you have the confidence you are operating within landlord tenant laws as it pertains to security deposits. Many owners I meet with are often surprised to learn there is a limit to the amount of security deposit you can require on a residential rental.

When you rent out a furnished property, you can only collect three times the monthly rental for a security deposit. When you rent a property unfurnished, you are limited to twice the monthly rent. In addition, remember that setting your security deposit too high will become an objection for applicants when you’re marketing the property. Make sure to keep that in perspective. If you’re properly screening your tenants and making sure to get landlord references from their current and previous landlords, an amount close to the monthly rent will typically be sufficient to cover most repairs beyond ordinary wear and tear.

The days of collecting first month’s rent, last month’s rent and a security deposit are long gone. A property renting for $1,800 per month would require move-in funds of $5,400 under that scenario. This is cost prohibitive for the average tenant looking to rent. First month’s rent and a security deposit equal to or slightly above the monthly rent is what we recommend to our clients. I also recommend adding $500 to the security deposit when a pet is approved. Do not, however, name that $500 a “pet deposit”. Simply increase the total deposit. If you separate out a pet deposit from a security deposit, you are limited to using that pet deposit exclusively to damage caused by the pet. For example, it cannot be used to repair a bathroom towel bar or replace a broken light fixture. It’s best to simply increase the total amount collected as a security deposit.

When a tenant moves out of your property in California, the landlord has 21 days to prepare and provide an accounting of how the security deposit was used. You must also provide proper documentation to the tenant. This is another area that many landlords find confusing and there are legal requirements to consider. In California, if a landlord withholds $125 or more from the tenant’s security deposit, the tenant must be provided with a copy of all invoices substantiating the expense together with the accounting, which is the detail of the charges. This accounting is referred to as a disposition.

Make sure you do not exceed the 21 day time frame that the law requires. Failure to have it postmarked within that period can result in the tenant getting awarded the return of the full security deposit, regardless of any repairs or damage.

If there is a time issue because extensive repairs are necessary, make sure you send out – at a minimum – an estimated accounting of the security deposit, noting what invoices you are waiting for. Provide the name, address and telephone number of the contractor or company you are using to complete the repairs. Once you receive those invoices, provide a final accounting to the tenant within 14 days of your receipt of those invoices.

The most important things to remember are that you are limited to two times the monthly rent when you are renting an unfurnished property, and it is absolutely important to keep within the 21 day timeframe when your tenant moves out. If you have any questions about how to establish your security deposit requirements, please contact us at Walters Home Management.

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Walters Home Management

16516 Bernardo Center Dr, Suite 200
San Diego, CA 92128

Ph: (858) 675-9515
Fax: (858) 675-7457
Email: info@waltershomemanagement.com
CalBRE #01255583

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