State Law
Civil Code Section 1950.5 regulates residential security deposits, defined as "...any payment, fee, deposit or charge ... used or to be used for any purpose, including... recovering rent defaults, repairing damages caused by the tenant, or cleaning." A security deposit may not exceed two (2) times the rent for an unfurnished unit or three (3) times the rent for a furnished unit.
Within three weeks after the tenant has moved out, the landlord must (1) furnish the tenant with an itemized written statement of the basis for, and the amount of, any security he/she received and the amount of and purpose for which the security was claimed and used; and (2) return any remaining portion of the security to the tenant. The landlord may claim only the amount that is reasonably necessary to (a) cover rent defaults, (b) repair damage other than normal wear and tear, and (c) do necessary cleaning.
A landlord who sells a rental property must either:
1. Transfer the balance of the deposit, after deductions for lawful claims, to the new landlord and notify the tenant, by certified mail or personal delivery, of the transfer and of any deductions, and provide the new landlord's name, address, and telephone number; or
2. Return the portion of the security remaining after any lawful claims, and provide an itemized accounting, to the tenant.
A tenant who does not receive the refund and accounting within three weeks, or disputes the amount claimed by the landlord, may sue the landlord for the disputed amount (in Small Claims Court if the amount is less than $5000) and up to $600 in damages for the "bad faith retention" of any security. In court, the landlord has to prove the reasonableness of any amounts he/she retained.
Berkeley Law
The Ordinance requires landlords to place deposits in an interest-bearing account at a savings and loan, insured by the FLSIC, and to return the earned interest to the tenants every December.
A tenant who has not received a refund of security deposit interest by January 10 of any year for the preceding calendar year may, after giving the landlord fifteen (15) days advance written notice of intent to do so, deduct interest at the rate of 10% percent simple interest per year, from the rent unless the landlord refunds the interest prior to the date the deduction is to be made. [Regulation 704 effective May 25, 1990.]
Landlords may not increase the amount of the security deposit for any tenant during the term of the tenancy. A landlord who is entitled to an increased security deposit as a result of an increase in the rent ceiling must wait until the commencement of a new tenancy to collect the increased amount. [Effective July 19, 1991.]