SECURITY DEPOSITS: HANDLE WITH CARE

Written By Andrew Hall

Security Deposits: Handle With Care

It is important that both residential landlords and tenants are familiar with the handling of security deposits in California: landlords so s/he can remit to the tenant properly in accordance with the law and tenants so s/he knows what to expect both in terms of when a security deposit is to be returned and what may be returned.  

First and foremost, if a tenant has made a security deposit, s/he is entitled to its return. California law prohibits a lease or rental agreement from characterizing security as “nonrefundable.” Further, a tenant’s claim for a refund of security has priority over the claims of landlord’s creditors. In other words, if you have made a security deposit, you are entitled to its return. And if you are a residential landlord, characterizing a security deposit as “nonrefundable” will not allow you to retain the deposit.

Upon a tenant’s vacation of the premises, the tenant is entitled to an itemized statement indicating the basis for, and the amount of, any security received and disposition of said security. Along with that itemized statement, the tenant is entitled to a return of any remaining portion of the security. Both the itemized statement and balance of the security must be sent to the tenant by personal delivery or first class mail, postage prepaid, unless the landlord and tenant mutually agree to another mode of service.

As for what may be deducted, both the tenant and landlord should look to the lease at it should expressly provide the purposes for the deposit. For example, when the deposit is security for the payment of rent, cleaning of premises, or repair of damages caused by the tenant, these items may be deducted by the landlord to the extent reasonably necessary to remedy a tenant’s defaults as to those items. The landlord’s right to deduct is limited to the purposes designated in the lease, so a landlord cannot, for example, make a deduction to repair damages that preexisted the tenancy or for ordinary wear and tear.

Should a landlord fail to adhere to these requirements, the tenant could have a legal claim against the landlord for bad faith retention of the security deposit. Further, should the landlord’s retention be found to be in bad faith, the landlord would be subject to statutory damages which, in addition to the actual damages for retention of the deposit, could amount to up to twice the amount of the security. Thus, it is extremely important for a residential landlord to handle security deposits with care and act diligently in making repairs and deductions immediately after a tenant vacates.

This update is provided to our clients, business associates and friends for informational purposes only. Legal advice should be based on your specific situation and provided by a qualified attorney.

Andrew Hall

Attorney Andrew Hall has over 10 years of experience handling complex real estate, business, and litigation matters throughout California and Washington. Andrew has vast experience with a wide range of clients – from residential to commercial property owners, landlords to tenants, real estate agents to brokers, title to escrow companies, hard money lenders to banking institutions. Andrew has handled cases ranging from administrative disputes, to unlawful detainers, to bankruptcies, to litigation, leaving his clients with the confidence that he can handle all of their needs from soup to nuts.

Andrew is committed to exploring efficient and cost-effective resolutions for his clients, whether that be through informal conversations with parties or attorneys, mediations, or settlement conferences. However, when litigation is inevitable, Andrew has counseled his clients through all stages of a dispute, including arbitrations, court trials, jury trials, and appeals at both the State and Federal Court levels.

Andrew resides in Carlsbad with his wife Lauren, son Nolan (7), and daughter Madeline (5). Andrew is actively involved with the Magdalena Ecke Family YMCA, where he can often be found on the weekends cheering Madeline on in any variety of youth sports or with Nolan participating in the Y’s Adventure Guides Program. Andrew enjoys playing golf, tennis, softball and good barbeque.

Andrew is committed to identifying his client’s goals and employing his big firm experience with small firm attention to help his clients achieve those goals.

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