Today we are talking about how to handle security deposits and other accounting when you are a landlord in San Francisco. There are no special rules in San Francisco regarding how you hold a security deposit. In California, you do not have to keep your security deposit in any special escrow account. You can mingle those funds however you want. The only important thing is that you have to make sure those funds are available when a tenant vacates your property and it is time to refund all or some of that security deposit that was paid upon move in.
You are required to pay interest on the security deposit in San Francisco. The interest must be paid annually, which means you need to send your tenants a check every year, or give them a onetime rent credit based on the amount of interest that is due on the security deposit. The amount of interest changes every year. This year, it is 0.4 percent. Every year the Rent Board sets the amount of interest that security deposits must be paid.
Keeping good records is essential when you are managing your rental accounting. Just like any investment that you might make, you want to have a detailed and accurate record of all your income and expenses. Use whatever method of recordkeeping that works for you, just make sure you are keeping up with it and that it is correct.
One more thing to remember is that you should keep copies of all the bills for the property. This includes PG&E bills, water bills, garbage bills and any bills associated with maintenance expenses. Having these records accessible will help you if you ever want to go to the Rent Board and get a pass through rent increase. When you do that, you will be required to have two years’ worth of all your bills. The Rent Board requires a lot of paperwork, so make sure you 
hang on to those bills and save them in a safe place with the rest of your financial records and bookkeeping.
So there you have it – your accounting responsibilities as a San Francisco landlord are not complicated. You need to pay interest annually on the security deposit and keep good records during the term of any lease agreements you have in place. If you have any questions about this, please contact us at Gordon Property Management.
