Civil Code Section 1950.5 governs the law regarding security deposits for all units in California whether or not they are covered by rent control. Section 1950.5 does not address the law regarding payment of interest on deposits (SF Administrative Code Chapter 49 does). California Civil Code Section 1950.5 states:

The total of all deposits and fees charged by the landlord for security, last month's rent, cleaning, processing a new tenant, etc. may not exceed twice the amount of one month's rent for an unfurnished apartment or three times one month's rent for a furnished apartment. The amount can be increased by a half month's rent if you have a waterbed.

There is no such thing as a non-refundable security deposit. No matter what it's called--key deposit, last month's rent, pet deposits, etc.--all money you pay above your first month's rent is refundable. A provision in a rental lease that represents a deposit as non-refundable is not enforceable. Exception: If you give your landlord money to "hold" an apartment you are interested in renting, and then change your mind, it may be possible for the landlord to keep part or all of this deposit. Check with the Housing Rights Committee or a legal clinic. The San Francisco Administrative Code Chapter 49 governs the law regarding payment of interest on security deposits.

The San Francisco Administrative Code Chapter 49 governs the law regarding payment of interest on security deposits. The following are interest rates since the law first passed:

    From September 1, 1983 to August 4, 2002, landlords must pay 5% interest on money held over a year.      
   

After Aug. 4, 2002 up to Feb. 28, 2003: 3.4% 
   
From March 1, 2003 to Feb. 28, 2004:  1.2% 
   
From March 1, 2004 to Feb. 28, 2005:  1.2%
   
From March 1, 2005 to Feb. 28, 2006:  1.7%
   
From March 1, 2006 to Feb. 28, 2007:  3.7%
   
From March 1, 2007 to Feb. 28, 2008:  5.2%
   
From March 1, 2008 to Feb. 28, 2009:  5.2%
   
From March 1, 2009 to Feb. 28, 2010:  3.1%
   
From March 1, 2010 to Feb. 28, 2011:    .9%
   
From March 1, 2011 to Feb. 28, 2012:    .4%

So if you lived in your apartment since 1997, the landlord pays you 5% interest from 1997-August 4, 2002 and then 3.4 until February 28, 2003. From March 1, 2003 and until February 28, 2005, the landlord pays 1.2%. From March 1, 2005-February 28, 2006, it's 1.2% and so on until you reach the present.

Interest rates are set every year by the Rent Board, to go into effect on March 1 of that year until February 28 of the following year. Payments are to be made on the tenant's move-in anniversary date each year, and when the deposit is refunded at the end of tenancy. If you move out before the end of a year after residing in the apartment for a year or more, you are entitled to a pro-rated interest payment for the portion of the year you lived in your apartment. For example: if you lived in your apartment for 18 months and then decided to move, your landlord would owe you interest for the first 12 months and a pro-rated amount for the 6 months left over (1/2 year's interest). Failure to get your interest during the past years doesn't prevent you from getting it retroactively, to 1983, at any time. Tenants who move out before a year's occupancy are not entitled to an interest payment. If you have never received regular interest payments, you are still eligible for retroactive awards. These are calculated from the baseline year of 1983, and may be awarded at any time. Tenants who move out before a year's occupancy are not entitled to an interest payment. If you are moving out and your landlord won't pay you your interest, take the steps outlined under the "stubborn landlord."

As of January 1, 1994, landlords have 21 days to return security deposits. If all or part of your deposit is being withheld, your landlord must send to you a written, itemized statement, within 21 days, listing the reasons why the amount is being withheld from your deposit. A landlord can deduct for damages (torn drapes he provided, cigarette burns in the rugs, etc.) but not for normal wear and tear (the rug is 500 years old and worn to the backing). One example we always use to distinguish is: The drapes are there when you move in and you live there ten years. The sun beats down on the drapes every day. By the time you leave, the drapes are faded, but it's not your responsibility, it's the sun's. On the other hand, if your cat uses the drapes as a scratching post for ten years, then you are responsible.

If your deposit is not returned to you within 21 days, if you do not agree with the amount that has been withheld, or if your landlord has not paid you interest: Send a letter to your landlord requesting the money and refer to the security deposit law California Civil Code 1950.5. (San Francisco Administrative Code Chapter 49 for non-payment of interest). Keep a copy of all correspondence. If your landlord does not respond within a reasonable time, you can sue in Small Claims Court (see info below). Small Claims Court is informal and no lawyers are allowed. You and your landlord will both have an opportunity to tell your story. Therefore, prepare all written documentation, inspection reports, rental agreements, receipts for deposits paid, and photos which will help prove your case.You can sue your landlord for statutory damges of twice the amount of deposit for bad-faith retention of the deposit: CA Civil Code 1950.5 (l). The maximum you can sue for in Small Claims Court is $7,500. For more information call Small Claims Court hotline at (415) 291-2124.

Get an itemized receipt for your deposit which identifies each charge. When you move in, take careful inventory of the condition of the place. Record any damage and check all equipment to ensure that it works properly. If possible, take photos of existing damage to ensure that you will not be blamed for it. Have the landlord or manager sign and date your inventory list and keep a copy.

Sometimes a landlord will try to increase the amount of money you have on deposit during your tenancy. State law does not address this issue. Check your lease. If you have a fixed-term lease, the landlord may not raise the security deposit unless the lease allows for it. If the security deposit already adds up to two months' rent, then the security deposit may not be increased. To raise a deposit the landlord must properly serve you with a 30-day written notice of the increase.

Landlords who sell their buildings are required to either transfer the security deposits to the new owner or return the deposits to their tenants. If deposit is transferred to the new owner, the old landlord must give the tenant a document stating the amount of the transfer and the new owner's full name and address.

Whether you are on a month-to-month tenancy or at the end of a fixed lease, the law requires that you give a thirty-day written notice before you move out. If you have not paid last month's rent ahead of time, you should pay it with your notice. If you move out without giving notice, your landlord may be entitled to deduct "unpaid rent" from your deposit. If you move out without giving notice and the apartment is re-rented right away, the landlord must return your rent from the time that a new tenant occupies the apartment. A state law (SB 2330), which went into effect January 1, 2003, mandates that a landlord notify a tenant of the option of having an initial inspection two weeks before terminating a premises in order to identify problems (and possible deductions from the security deposit) and be given a chance to rectify them and avoid the deduction.


A practical example of this: Tenant Juan gives landlord Jill a 30-day notice that he is leaving March 1. Within a reasonable time after receiving the notice, Jill should contact Juan in writing and schedule an initial inspection at which Juan can be present. If Juan agrees, the inspection happens (no earlier than two weeks before the end of the tenancy and with a 48-hour notice) and Jill gives Juan an itemized list of what problems exist. Juan then has time to fix the problems and avoid deductions.

If you are moving out before the end of your rental agreement, notify your landlord in writing as soon as possible of when you will be leaving. You are responsible for paying rent on the apartment until the apartment is re-rented or until the lease expires, whichever comes first. The law requires landlords to make all reasonable efforts to rent the apartment to another tenant at the best possible price (mitigate their damages). We recommend that you also help to mitigate the landlord's damages by trying to find another tenant: Put a notice on Craigslist and signs in cafes and other places. Once the landlord re-rents the apartment your obligation to the landlord ends, although he can try to charge you the difference in the rent you were paying and the new tenant is paying, if it is lower.

If you were required to pay for the last month's rent before moving in, check your lease to determine what you have actually paid for. If the lease says "security for last month's rent," then you have not actually paid for the last month's rent, but just provided security for it, and must pay your rent on time as usual. If the rent has been raised, you must pay the difference between the final rent and the security for last month's rent. If the rental agreement simply says "last month's rent," then you have paid for last month's rent and do not have to again. Further, you are not responsible for the differential amount caused by a rent increase.

If part of your deposit was not specifically for last month's rent, you are required to pay rent for the last thirty days you live in the apartment. Write a letter to your landlord a month or two before you leave telling him/her that you will not be making your usual rent payment, and that your deposit should be applied towards rent. Offer to have the landlord inspect the apartment for damages before you move out. If your landlord does not like this arrangement s/he can give you a three day notice to pay rent or move out. If you do neither, your landlord must go to court to evict you for non-payment of rent. It would probably take several weeks to bring this case to trial, and therefore it is very unlikely that your landlord will follow up with this. However, if your landlord persists by suing you for eviction, take steps to avoid having a judgment entered against you.

Small Claims Court is relatively simple. No attorneys are allowed. The best comparison is to TV court programs such as Judge Judy: You present your case, the landlord presents his or hers. The judge decides. Small Claims can be used for a whole host of tenant problems, including decrease in services, illegal rent increases, etc. To file, go to the courthouse at 400 McAllister St./Polk during regular business hours. The cost of filing for Small Claims has jumped up. It's now based on how much you're suing for. If your suit is for up to $1,500, the cost is $30.00. From $1,500-$5,000, it's $50.00. From $5,000-$7,500: $75. The court still offers fee waivers if you are low-income. So you should ask for them. For help with filing in Small Claims, check out the Access Center:

575 Polk Street, Room 001
San Francisco, CA 94102
Information line: (415) 551-5880

Regular business hours at the center are:
Morning Sessions: Monday - Friday (8:30 a.m. to 12 Noon)
Afternoon Session: Monday - Thursday (1:30 p.m. to 4:00 p.m.)