Are pet deposits counted as part of the maximum amount permitted under law for security deposits?

Yes. A security deposit is defined by law as any “payment, fee, deposit or charge… that is imposed at the beginning of the tenancy to be used to reimburse the landlord for costs associated with processing a new tenant or that is imposed as an advance payment of rent…” to be used for the following: (1) to compensate the owner for defaults in the payment of rent; (2) to repair damages to the premises, caused by the tenants or their guests, in excess of ordinary wear and tear; (3) to clean the premises at the end of the tenancy to the same level of cleanliness that existed at the inception of the tenancy; or (4) if the rental agreement so provides, to restore or replace the landlord’s furnishings exclusive of normal wear and tear.

A security deposit includes all prepayments of money, no matter how labeled. Thus, pet deposits, cleaning deposits, and last month’s rent are all considered security deposits and subject to the security deposit law. (The only exception is “first month’s rent,” which is applied to the rent due for first month of the tenancy.)

In addition to collecting first month’s rent, the owner may collect up to two months’ rent for unfurnished units, and three months’ rent for furnished units, as a security deposit. Tenants who have waterbeds may also be charged an additional one-half of one month’s rent. No other security may be charged.

Please note that disabled tenants who bring in a seeing-eye dog or a comfort animal cannot be charged an extra deposit. These animals are akin to a wheelchair or other accommodation alteration. By law, landlords must allow tenants, at the tenants’ expense, to make reasonable modifications to the rental units provided that the tenants agree to restore the premises to the original condition at the end of the tenancy. However, no additional security deposit can be charged for the alterations or the animal.

In San Francisco, all residential tenancies, including tenancies in non-rent controlled buildings, are subject to the “annual interest on security deposit” legislation. This law states that, for a tenancy exceeding 12 months and where a security deposit has been collected, the landlord must, on each anniversary date, pay simple interest on the entire deposit. The rate of interest was 5% per annum until 2002, when legislation was passed that made the yearly rate dependent on the Federal Reserve Rate. In 2005, the rate is 1.7%. For rent-controlled units, annual interest payments to tenants can be credited against the tenant’s share of the Rent Board’s Rental Unit-Fee (currently $11.00 per residential unit).

Therefore, when renting a unit to someone with pets, you may want to charge the maximum deposit allowed so as to ensure the availability of funds necessary to repair pet damage at the end of the tenancy. Finally, please remember that the law requires you to itemize all security deposit expenditures and to provide documentation to the tenant within 21 days after departure. When the combined repairs and cleaning charges exceed $125, the owner must also provide copies of receipts to the tenant. The tenant’s itemization and documentation, along with any refund, should be mailed to any forwarding address provided by the tenant. If none is provided, the mailing should be sent to the vacated unit (and the Post Office will forward the letter to the new address).