Security Deposits: What You Need to Know About Security Deposit Refunds in Los Angeles

Security deposits are often misunderstood by both tenants and landlords. If there’s going to be a dispute, it’s likely going to occur when a tenant has moved out and the landlord makes a decision about whether or not to return the full deposit or to make deductions for cleaning and repairs.

As a Los Angeles rental property owner, you are required to return the resident’s deposit within 21 days of move-out. If you make any deductions for cleaning, damage, or unpaid rent, you’ll need to provide an itemized list as well as any invoices, repair bills, or other documentation.

Many rent-controlled units in Los Angeles County require that owners pay interest on the deposit they’ve collected from a tenant.

Today, we’re sharing some of the most important things you need to know before you manage the return of your tenant’s security deposit.

Document Every Property Inspection

Documentation is always important when you’re renting out your Los Angeles property, but it’s especially critical when you’re returning a tenant’s security deposit. If you deduct any money from that deposit, you’ll need to explain why. Tenants will usually disagree with what you consider to be damage. They’ll claim it’s wear and tear or they’ll insist something “looked like that when they moved in.”

This is why it’s so important to have pictures, notes, videos, and any other proof you can provide when you’re making a deduction. During the move-in inspection, make sure you’ve accurately documented the condition of the property, and have the tenants contribute to and sign off on that inspection report. Use the same report when you’re conducting the move-out inspection so you can compare the condition of the home then and now.

Follow California Security Deposit Timelines

In California, you need to return the tenant’s security deposit within 21 days of that tenant moving out of your property. If you’re going to keep all or part of the deposit, you must send an itemized list of the deductions you’ve made within those same 21 days. 

If a tenant pushes back against the charges you’re making, invite them to look at the photographs and the documentation you have. This might show them why you’re making the deduction. If they continue to argue the point, think very hard about how far you want to go. A court case will be time consuming and if you lose, expensive. It may not be worth the $100 cleaning charge you’re making against the deposit.

Security Deposit Interest in Los Angeles County

State law does not require that you pay interest on the tenant’s security deposit, but in some specific Los Angeles County cities, there is a requirement that interest is paid.

• Los Angeles Security Deposit Interest
  In Los Angeles, The Rent Stabilization Ordinance (RSO) requires the payment of interest on security deposit to tenants. This includes cities in the San Fernando Valley.

  Interest payable to tenants in rent controlled units may be determined in one of two ways: 1) the simple interest rate established by the Rent Adjustment Commission; or 2) the actual amount earned on the security deposit.

  If you select the second method, you will need to provide the tenant with a copy of a bank statement indicating the interest earned on their deposit for the year. If you didn’t use an interest bearing account, then the simple interest rate established by the Rent Adjustment Commission must be applied.

• West Hollywood Security Deposit Interest
  The City of West Hollywood's Rent Stabilization Ordinance requires that tenants be paid interest on their security deposits by January 31 of each year in an amount determined by the City based on prevailing interest rates. The security deposit interest rate for 2020 happens to be zero percent.

• Beverly Hills Security Deposit Interest
  In Beverly Hills, there is no requirement for interest to be paid on a tenant’s security deposit.

• Santa Monica Security Deposit Interest
  In Santa Monica, there is no requirement for interest to be paid on a tenant’s security deposit.

We know that understanding and following security deposit laws can be difficult even for the most experienced investor. When you need help working through the limits, requirements, and best practices for security deposits in Los Angeles County, please contact us at MGMT Group, Inc.