Are you a landlord or a tenant in California? If you are, then you`re probably familiar with the concept of a holding deposit. A holding deposit, sometimes referred to as a “good faith deposit,” is a sum of money that a tenant pays a landlord to hold a rental unit while they complete the application process.

The purpose of a holding deposit is to show the landlord that the tenant is serious about renting the unit. In exchange for the deposit, the landlord agrees to take the unit off the market and not offer it to anyone else during the application process. Once the application is complete, the landlord will either return the deposit to the tenant or apply it towards the security deposit.

If you`re a landlord or a tenant in California, it`s important to know the legal requirements regarding holding deposits. The California Civil Code imposes specific rules that landlords must follow when accepting and holding holding deposits.

Here are some of the key rules:

1. Acceptable Amount: A landlord can typically request an amount equal to two times the monthly rent as a holding deposit. The landlord must disclose the amount in writing to the tenant before accepting it.

2. Time Frame: A landlord must refund the holding deposit to the tenant within 21 days of the tenant`s move-in date, unless the landlord and the tenant agree in writing to an extension. If the landlord fails to refund the deposit within the allotted time, the tenant may be entitled to recover twice the amount of the deposit.

3. Written Agreement: Both the landlord and the tenant must sign a written agreement that specifies the amount of the holding deposit, the terms of its return, and the circumstances under which the deposit will be forfeited.

4. Forfeiture: A landlord may only keep the holding deposit if the tenant fails to move in, or if the tenant provides false or misleading information on the rental application.

It`s important to note that a holding deposit is not the same thing as a security deposit. A security deposit is money paid by the tenant to cover any damage or unpaid rent at the end of the tenancy. A holding deposit, on the other hand, is only meant to reserve the unit while the tenant completes the application process.

In conclusion, if you`re a landlord or a tenant in California, it`s important to understand the legal requirements for holding deposits. By following the rules, you can ensure a fair and transparent process that benefits both parties.