Leu Real Estate in Folsom
Leu Real Estate in Folsom
Leu Real Estate in Folsom

Common Security Deposit Issues

Part One

The most common dispute between a former tenant and a landlord is the partial or full withholding of a security deposit.  Security deposit laws for residential tenancies are summarized below in order to help a landlord to understand the intent of such a deposit.

Under the law, the deposit is held by the landlord as security in the event of a tenant's default.  Until this occurs, however, the security deposit remains the property of the tenant.  The landlord has a duty to account for it and hold it for the tenant.

The Amount
Statute (laws) and/or local ordinance governs the amount of deposit that a landlord may hold.  The landlord must be aware of these laws.  Usually, a landlord may collect the first month's rent, and two months rent if property unfurnished or three months' rent if unfurnished.

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Many rental agreements and leases require a last month's rent as part of the deposit.  Beware of the specific language in the agreement, as the therm "last month's rent" could be ambiguous leading to disputes at the end of the rental term.  For example, tenants believe that such a provision means the last month's rent does not have to be paid when they move out.  But, if the rent has increased, the landlord might believe that the difference between the deposit for last month's rent at the beginning of the lease and the current monthly rent at move-out time is still owed.  If it was a long tenancy, this could be a significant amount.

The specific wording in the lease or rental agreement is crucial. For example, if it says that the deposit si for the "last month's rent", then the tenant may be right.  On the other hand, if it says that the deposit is "security" for last month's rent, then the landlord may be right.  A court will generally decide any ambiguity against the drafter of the agreement which is normally the landlord whether it was a form agreement or not.

At this time (as of January 2015), there are no State laws requiring deposits be held in an interest bearing account for the tenants benefit, although numerous cities do require this.  Therefore, the landlord needs to be aware of local laws regarding this requirement.

According to California law, the landlord is specifically allowed the use the deposit for four purposes:
1.  For rent that has not been paid;
2.  For cleaning the rental unit on move-out to move-in level of cleanliness;
3.  For repair of damages that tenant or tenant's guests caused (not including normal wear and tear);
4.  Replacing, restoring, or returning property other than because of normal wear and tear.
The landlord can only withhold amounts from the security deposit that are reasonable for these four purposes listed above.  The deposit can never be non-refundable.

After Move-out
With respect to a residential lease under California law and within 21 days after the tenant's move-out, the landlord must either:
1.  Fully refund the security deposit;
2.  Personally deliver or mail an itemized statement listing the amounts of deductions from the security deposit and the reasons for those deductions, with a refund of any remaining amounts from the security deposit.  Receipts for third party repairs must also be provided.  The following rules for deductions apply:
     a.  If the landlord did the work either himself or hired workers, the itemization needs to describe the performed work, time spent, and hourly rate which must be reasonable.
     b.  If a third person was hired, copies of the person or business' receipt or invoice with the name, address, and telephone number must be provided to tenant.
     c.  Copies of invoices or receipts for materials or supplies purchased by landlord for repairs must be provided.
     d.  If receipt(s) or invoice(s) are not yet available within 21 days, the landlord may estimate in good faith the charges in the itemized statement including the name, address, and phone number of the business or person supplying the materials or services.  Within 14 days after completing the repairs or receiving the receipts, the landlord must provide a corrected itemized statement to the tenant with the receipts along with any refund due to the tenant. 
If the repairs or cleaning cost less than $125 or a written waiver is signed by the tenant within 60 days prior to the expiration of a fixed term lease, the landlord does not have to provide copies of invoices or receipts to the tenant.

Sale of the Building
When a building is sold by a landlord to a new owner, the landlord must either transfer the deposits to the new landlord, or refund the security deposits after the sale.  The selling landlord may make the itemized deductions before  transfer or refund provided he also provide a written itemization (described above).  The selling landlord must also notify in writing to the tenants that their deposits are being transferred.

The information provided here is for general informational purposes only.  Please direct specific legal questions to your attorney.