The amount, use and return of security deposits is regulated by state law, under Section CC 1950.5. All money collected in advance by the landlord from the tenant for protection against default or damage, whether it is called "last month's rent", "security", "cleaning", etc., is held to be a form of security deposit subject to these regulations.
The total amount allowed, in addition to that paid for the first month's rent, cannot be more than the amount of two month's rent for an unfurnished rental unit or three month's rent for a furnished unit.
All security deposits must be refundable. This means that the tenant must have the opportunity to satisfy the conditions which will permit him to recover his deposit. A landlord cannot require, in advance or routinely, that all tenants pay such expenses as professional cleaning or painting or replacement of carpets or drapes. However, such deductions could be allowed if they can be justified in terms of the condition when the tenant moved in and the degree of care given during the tenancy.
Within three weeks after the tenant moves out, the landlord must either send a full refund of the security deposit or an itemized statement that lists reasons and amounts of any deductions from the deposit, with a refund of any amounts not deducted. The landlord can withhold from the security deposit only those amounts that are reasonably necessary for unpaid rent, repair of damages other than normal wear and tear caused by the tenant or the tenant's guests, and for cleaning the rental unit if the unit was not left as clean as when it was rented. If the security deposit includes an amount designated as "last month's rent", that portion of the deposit must be applied to the rent for the last month before the tenant leaves and will NOT be available for other purposes.
Unpaid rent can include the amount which a tenant owes because proper notice of intention to leave was not given. A 30-Day written notice is required to end a month-to-month tenancy. The notice can be given at any time and does not have to be the same as the day the rent is due. However, even if he moves out earlier, the tenant is responsible for the full rent for the period covered by the notice (or lease, if there was one) unless rent is paid by a new tenant for the period. Less notice is required only if the parties have agreed in writing, or if rent is usually paid at a shorter interval. For example, if rent is paid weekly, only a 7 day notice must be given.
Disputes commonly arise over what is meant by normal wear and tear or necessary cleaning. The landlord must be able to prove the necessity and reasonableness of the amounts claimed. He should be prepared to produce receipts, estimates, witnesses, photos, etc., to support his deductions. A walk-through before the tenant moves in and one after the move-out is recommended for the protection of both parties. A rental agreement that clearly spells out the conditions which the tenant must meet can also be helpful.
If after three weeks, the tenant has not received his/her deposit or an itemized statement of deductions, of if he/she believes the deductions are improper, he/she should write to the landlord and keep a copy of the letter. If the disagreement is not resolved, he/she can file a suit in Small Claims Court for the deposit plus punitive damages of up to twice the amount of the security, in addition to actual damages. The damages can be awarded if the judge feels that the landlord acted in bad faith and not because of an honest dispute. Civil Code section 1950.5(l).
If the rental unit is sold during a tenancy, both the old and new owners can be liable for returning the deposit when the tenant moves, unless at the time of the sale, the old owner returns it to the tenant or transfers it to the new owner and notifies the tenant as to the amounts transferred or deducted and the name, address and telephone number of the new owner.
In a shared housing month-to-month rental, if the moving tenant has originally paid his deposit to a roommate, generally that roommate will be responsible for its return. If the deposit has been paid directly to the landlord in the moving roommate's own name, he should recover it from the landlord. Roommate situations can become very complicated and landlords and tenants should have written agreements which clearly define the rights and responsibilities of all parties.