Rent Control Regulations and Security Deposits in California

Landlord-tenant relationships in California are regulated by numerous statutes at the state level and city ordinances at the city level.  Foremost among all these regulations is the concept of “rent control,” wherein a city regulates the amount a property owner can charge tenants for rent, including increases in rent during the term of a tenancy.  Other forms of rent control limit the circumstances under which a landlord can evict a tenant, or require specific notice before a landlord can order an eviction.  Numerous cities around California have some form of rent control, from many of California’s largest cities such as  Los Angeles, San Francisco, Oakland, and San Diego, to many smaller cities such as Gardena and Los Gatos.

Several of these cities have well-established procedures and regulations with appointed boards or staff who mediate disputes concerning rent levels, rent increases, unlawful detainers and wrongful evictions.  The regulations often make up phonebook-sized volumes of guidelines and many attorneys focus 100% of their practice on landlord-tenant work.

In spite of the numerous regulations governing rent however, it may be a surprise to learn that relatively little regulation governs another area of landlord-tenant financial compensation – security deposits. Many tenants pay one month’s rent as a security deposit when they first move in. But what happens if a tenant lives in an apartment for 10 or 20 years and their initial security deposit remains the same? If the purpose of a security deposit is to compensate a landlord in case a tenant causes damage, then one month’s rent will eventually provide little “security” as costs to repair rise over time while the amount of the security deposit remains the same.

Cal. Civ. Code 1950.5 governs security deposits in California.  Under the code, a landlord’s security deposit can be collected as advance rent for many purposes, including (1) compensation for a tenant’s default, (2) repair for damage to the premises beyond ordinary wear and tear, or (3) cleaning of the premises after a tenant moves out to bring the unit to the same level of cleanliness it was in before the tenant moved in.

Under California law, a landlord can charge up to two months’ rent as a security deposit for an unfurnished rental or three months’ rent for a furnished unit.

As for increasing security deposits after they have been set, the general rule is a landlord may increase a security deposit during a tenancy up to these levels unless a local rule bars such increase.  No statewide law bars a landlord from increasing a security deposit during a tenancy up to the amounts listed above.

The city of Santa Monica is one of the few cities which does not allow security deposits. Santa Monica Rent Control Board Regulation 14002 prevents a landlord from increasing a security deposit during a tenancy at all.

In San Francisco, the S.F. Rent Board regulations do not prevent a landlord from increasing security deposits during a tenancy.  The S.F. Rent Board has stated:

There is nothing in the law that specifically allows the landlord to raise the security deposit amount over time, although some landlords believe that the deposit can be brought up to reflect two months of the current rental amount with proper notice. Since this is a matter of state law, the Rent Board does not handle such disputes.

Other cities may have a different approach to security deposits so it is important to check the local ordinance and regulations in order to know whether landlords are entitled to raise a security deposit after it has been initially set.

If you are a landlord, property owner, or a tenant and have additional questions about rent control, feel free to contact John Corcoran at (415) 472-8100 x211 or jcorcoran@ptlegal.com.

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