Legal Question in Real Estate Law in California

Legally you can not deduct last month's rent from the security deposit as the security deposit is to cover possible damages that you are responsible for and is not a payment of rent.

It depends on your lease terms. When I was landlord I allowed tenants to use deposit for last month's rent if they scheduled a walk through before the rent was due and I agreed that there would still be enough left to cover any damages. If the lease does not have any such provisions, however, you will be in breach of the lease if you do not pay your last month's rent and then wait for your deposit to be refunded.

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There is a lot of confusion regarding this, and the answer depends on some subleties.

First of all, if the landlord took a deposit and the lease specifically stated that the deposit or a portion of the deposit was for last months's rent, then the last month's rent has been paid.

For example, a tenant signs a lease and pays a security deposit and last month's rent. The lease specifically states that a portion of the deposit was for the last month's rent. The tenant's last month - the sixth month - has been prepaid. The tenant then only has the responsibility of paying the first 5 months rent. Landlord's don't like to do this, so that situation is rare.

Second, the law clearly provides that a security deposit may be used for defaults in rent. (Civ. Code, sect. 1950.5, subd. (b)(1).)

That arises in one of two ways. First of all, if a tenant and landlord agree, the security deposit can be applied to the last month's rent. Second, and more often, the tenant defaults in payment of the last month's rent, and the landlord applies some or all of the security deposit to the last month's rent. That situation often arises during eviction proceedings. Landlords are often reluctant to agree to apply the security deposit to rent, when the tenant is still occupying the property, because the landlord does not want to lose the ability to look to the security deposit to cover expenses repairing the unit above normal wear and tear.

Generally speaking, a deposit is the landlord's protection against getting stuck at the end of the lease, and therefore must be maintained at its full amount until the lease ends and the tenant moves out, at which point there needs to be a settling-up withon (usually) 21 days, per Civil Code section 1950.5. However, when there has been a good landlord-tenant relationship and the landlord is reasonably confident that the premises will be vacated in good, clean condition, the landlord will allow the deposit, or part of it, to be applied to the last rent instalment.