In California, there are specific laws as to how and when security deposits must be returned. A landlord in California does not always have to pay interest on a security deposit. The rules vary by locality within California, but there is no general state law providing for interest on all security deposits tendered to landlords.
Return of Deposit
Your landlord must return your security deposit within 21 days after you move. If your landlord does not return your full security deposit, he is required to mail or personally deliver you an itemized statement of any deductions, the reason for those deductions and a partial refund if applicable.
Reasons for Withholding
Landlords may only withhold security deposits for limited reasons, including unpaid rent, cleaning the rental unit to return it to the same condition as when the tenant moved in, repair of damages other than normal wear and tear -- and if the lease allows it -- the cost of replacing any furnishings or other personal property.
There is no statewide law in California requiring landlords to pay interest on security deposits that they hold on behalf of their tenants. In certain cities such as Berkeley, Santa Monica and San Francisco, there are local ordinances requiring landlords to pay interest on security deposits. The terms and rates vary by locality, so be sure to check in your area. In San Francisco for instance, landlords must pay a interest on any security deposit held for for more than a year. The rate of interest varies and is determined by the San Francisco Rent Board.
If you are unsure if your landlord should be providing you with interest payments from your security deposit, you should check local ordinances or ask the landlord before moving into the rental property or signing a lease. Even if your locality does not offer interest payments on security deposits, you may negotiate them as a term of your lease prior to reaching an agreement with the landlord.