California Code, Health and Safety Code - HSC § 34080

(a) The owner of the rental property shall agree to allow the security deposit to be paid over a specified number of months as an addition to the regular rental payment, rather than as a lump-sum payment.

(b) Upon execution of the agreement, the local agency or organization shall encumber or reserve in a special fund as a guarantee of the contract, an amount equal to no less than 80 percent of the outstanding balance of the security deposit owed by the tenant to the landlord.

(c) The tenant shall agree to a payment schedule of a specified number of months in which time the total amount of the required deposit shall be paid to the property owner.

(d) At any time during the operation of the guarantee, the property owner shall make all claims first against amounts of the security deposit actually paid by the tenant and secondarily against the guarantee. At no time during or after the tenancy may the property owner make claims against the guarantee in excess of that amount agreed to as the guarantee.

(e) If a deduction from the guarantee fund is required, it may be accomplished only to the extent permitted by the contract and in the manner provided by law, including notice to the local agency or organization. The tenant shall have no direct use of guarantee funds, including funds which may be referred to as “last month's rent.”

The department shall make available to local agencies and organizations receiving deposit guarantee or grant contracts forms deemed necessary for the contracts and the determination of eligibility. However, local agencies and organizations may develop and use their own forms as long as the forms meet the requirements of the deposit guarantee and grant program.