Assembly Bill 2330, which is effective January 1, 2003, provides tenants the right to an inspection prior to the move out date to identify repairs or cleaning services that are proposed to be the basis for any legally permissible deduction from the security deposit. It further grants the tenant the opportunity to correct any identified deficiencies in the condition of the property in order to avoid deductions from the security deposit. The new procedures for the move-out inspection are as follows:

1. Within a reasonable time, but not earlier than two weeks, after notification of either party’s intention to terminate the tenancy, or before the end of the lease term, the landlord shall notify the tenant in writing of his or her option to request an initial inspection and of his or her right to be present at the inspection.

2. If an inspection is requested, the parties shall attempt to schedule the inspection at a mutually acceptable date and time.

3. The landlord shall give at least 48 hours prior written notice of the date and time of the inspection if either a mutual time is agreed upon, or if a mutually agreed time cannot be scheduled but the tenant still wishes an inspection.

4. The landlord shall proceed with the inspection whether the ten- ant is present or not, unless the tenant previously withdraws the request for inspection.

5. Based on inspection, the landlord shall give the tenant an itemized statement specifying repairs or cleaning that are proposed to be the basis of any deductions from the security the landlord intends to make pursuant to California Civil Code Sections 1950.5(b) and (D)which set forth, among other things, the items that may be properly deducted from the security deposit, including the following:

a. Defaults in the payment of rent;
b. Repairing damages, other than ordinary wear and tear, caused by the tenant or the tenant’s guest or licensee;
c. Cleaning costs for the return of the unit to the same level of cleanliness it was in at the inception of the tenancy.
d. Future defaults by the tenant to restore, replace, or return personal property as authorized by the rental agreement.

6. The statement shall be given to the tenant, if the tenant is present for the inspection, or shall be left inside the premises.

7. The tenant shall have the opportunity during the period follow- ing the initial inspection until termination of the tenancy to remedy identi- fied deficiencies, in a manner consistent with the rights and obligations of the parties under the rental agreement.

The landlord’s existing duty does not change. Therefore, a landlord must provide the tenant, within three weeks after the tenant vacates the prem- ises, an itemized statement of the final disposition of the security deposit. The landlord may use the security deposit for the following purposes: (1) Items revealed in the inspection statement that the tenant failed to cor- rect; (b) Items arising between completion of the inspection and termina- tion of the tenancy; and (c) Items that were not identified during inspec- tion due to the presence of the tenant’s possessions. The remaining por- tion of the security must be delivered to the tenant either by personal delivery or first class mail, post prepaid.

Things to Consider. The statutory language is unclear as to whether a landlord carrying out the inspection procedures must also comply with the separate right-of-entry requirements which are reflected in Senate Bill No. 1403. They basically state that landlords must provide written notice to tenants when they intend to enter the premises unless there are special circumstances which would allow immediate entry. However, the landlord’s right to enter the premises to conduct this move-out inspection has also been included into the right-of-entry statute set forth in California Civil Code Section 1954. Therefore a cautious landlord should, for the time being, comply with both statutes until the courts or the Legislature clarifies some of the following issues.

1. Waiver of 48-Hour Notice. Section 1950.5(f) allows waiver of the 48 hour notice of inspection if the waiver is in writing and is signed by both the landlord and tenant. However, section 1954 does not explicitly allow the waiver and specifically requires the landlord to provide written notice of the landlord’s intent to enter to conduct a move-out inspection. Therefore, a landlord should provide written notice of an upcoming inspection and avoid the right to waive that notice requirement until the courts or the Legislature clarifies this issue.

2. Normal Business Hours. Should a tenant request a move-out inspection but the parties cannot mutually agree to a date and time, the landlord must unilaterally set a date and time for the inspection and notify the tenant accordingly. The landlord should keep the the schedule during “normal business hours” as required by section 1954. However, since “normal business hours” are not defined, some practitioners interpret it as excluding evenings and weekends.

3. Methods of Service. Section 1950.5(f) does not provide any specific delivery methods of the required notices but since 1950.5(f) has been incorporated into section 1954; then a landlord should deliver the inspec- tion notices in one of the following ways:
a. Personal delivery to the tenant;
b. Left with someone of suitable age and discretion at the premises;
c. Left on, near, or under the usual entry door in a manner that a rea- sonable person would discover the notice; or
d. Mailed to the tenant. Anotice mailed at least six days before an intended entry is presumed reasonable notice absent evidence to the contrary.

New Definition for Security Deposit
Effective January 1, 2003, “security deposit” takes on a new meaning. A “security” used to be defined as any payment, fee, deposit, or charge, including those imposed as an advance payment of rent. Under the new law, a security deposit will include any charges imposed at the beginning of the tenancy which could now be used to reimburse the landlord for costs associated with processing a new tenant, other than application screening fees (discussed below).

The impact is significant because a residential landlord may only collect a security deposit equal to two months of rent for unfurnished units and three months of rent for furnished units. To break it down, here’s an example:
An unfurnished residential property at $800 per month under a month-to- month agreement, the maximum amount that the landlord can collect up front is $2,400 or $800 rent for the first month plus $1,600 as a security deposit. In cases where the landlord charges a $20 general processing fee, effective January 1, 2003 that $20 is considered as part of the $1,600 security deposit.

A landlord cannot label fees and collect funds on them such as move-in fee, pet fee, cleaning fee, or last month’s rent. The only five exceptions to the rules limiting the amount of a security deposit are as follows:

1. Application screening fees for actual, out-of-pocket costs for obtaining information about a rental application, such as credit reports and reference checks. However, the screening fee cannot exceed $30 per applicant, plus annual CPI_adjustments after January 1, 1998.

2. Advance payments of not less than six months of rent for residential leases with a term of six months or more.

3. Separate fee agreements between the landlord and tenant for structural, decorative, furnishing, or other similar alterations, but not for cleaning or repairs.

4. For waterbeds, an additional one-half of one month’s rent as a security deposit, plus a reasonable administrative fee.

5. These security deposit limitations does not apply to commercial properties.

New Cleanliness Standard
For tenancies that began after January 1, 2003, a landlord incurring costs to clean the premises after a tenant moves out, may only deduct from the security deposit the cleaning costs incurred that were neces- sary to return the unit to the same level of cleanliness it was in at inception of the tenancy. For tenancies that began January 1, 2003 or earlier, the cleaning standards generally state that a landlord can deduct from the security deposit “the cleaning of the premises upon termination of the tenancy.”

Bad Faith Claims of Security Deposits
Effective January 1, 2003, a landlord who acts in bad faith in claiming or retaining a security deposit will be subject to twice the amount of the security deposit plus actual damages. This has changed significantly in that a landlord use to pay $600 plus actual damages in the past. Now in addition to the change above, a court may impose a statutory penalty against the landlord, even if the injured party does not specifically request such relief. The landlord will also bear the burden of proving the reasonableness of the amount of security deposit claimed.


Sources: California Assembly Bill 2330 (Migden), amending California Civil Code section 1950.5(f) and 1954;California Assembly Bill 2330 (Migden), amending California Civil Code Section 1950.5(b)(3). The aforementioned is provided for informational purposes only. Please consult your attorney, licensed real estate professional or C.P.A. with any questions.


All information provided is deemed reliable but is not guaranteed and should be independently verified.

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