According to KRON4, the most recent U.S. News & World Report ranked San Jose, CA, as the fourth-best place to live in the country for high quality of life. After all, it offers a lot, such as job opportunities, the mountains, the ocean, and 300+ days of sunshine.
So, it's also no wonder this beautiful city is a prime real estate spot. Being a savvy landlord here can be lucrative.
But to be a savvy landlord, you must first learn the best practices for handling security deposits.
Our team here at PMI San Jose has compiled tenant security deposit tips to help you get started, so read on.
Understanding Security Deposit Terms
Cal. Civ. Code § 1950.5 governs security deposit regulations in California. Under this section, the term "security" means any deposit imposed by the landlord at the start of a tenancy, which they can use to:
- Cover unpaid rent
- Pay to repair property damages that exceed ordinary wear and tear
- Cover cleaning costs to return the premises to the same state of cleanliness as when the tenant first moved in
Suppose one of your tenants informed you they won't renew their lease. So, after they left, you inspected the property. You soon discover it now reeks of smoke, and multiple cigarette burn marks have ruined your carpets.
In that case, you can use part of their security deposit to pay for the cleaning and repairs of your premises.
Recent Amendments
According to the California Apartment Association, the state rolled out changes to security deposits, which took effect beginning July 01, 2024. Before this date, state laws allowed landlords to require a deposit of up to two times the monthly rent for unfurnished units. For furnished properties, the limit was up to three times the rent.
From July 01, 2024 onwards, landlords can only charge a security deposit equivalent to one month of rent. The amendment applies to landlords who own two or more residential rental properties or four or more (total) rental units.
If you fall below that threshold, you can still charge renters up to two months' rent as a security deposit. However, if you have tenants who are service members, you can only require them to make a deposit equivalent to one month of rent.
Using and Returning Security Deposits: Best Practices
Per Cal. Civ. Code § 1950.5, you only have 21 days to return your tenants' security deposits from when they move out. So, set a reminder because if you fail to return it on time, your previous renter may sue you. If you must use more than $125 of the security deposit, you must also send the tenant an itemized statement that explains the deductions in detail.
Get Expert Help for Security Deposits
Security deposits protect San Jose, CA, landlords against tenants who default on their rent payments or cause unnecessary and intentional property damage. However, landlords must still adhere to strict California laws.
If you're anxious about committing compliance mistakes, PMI San Jose is here to help. We can handle all crucial aspects of your rental, from marketing your property to screening tenants and handling security deposits. Our owner, Steve Zehring, is a San Jose native with years of property management experience.
So, call us today to learn how we can help and get your free rental analysis!
