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SECURITY DEPOSIT REFUNDS IN
RESIDENTIAL TENANCIES IN CALIFORNIA: THE BASIC LAW
INTRODUCTION:
One of the most problematic
areas of landlord-tenant relationships revolve around the return of
security deposits, the money deposited with the landlord in residential
leases which is returned to the tenant after the landlord determines if
any deductions can be made.
The reason for the
often heated exchanges is simple: the return of the security deposit
occurs at the end of the relationship when the landlord and tenant are
unlikely to see each other again-except, perhaps, in court. Whatever
economic motivations caused them to cooperate before are over and the
tenant, facing the costs of the move, and the landlord, facing the cost
of re-renting the unit, are both seeking to maximize the sums available
to them from the deposit.
The California law
is clear on the rights and remedies available for the parties and both
landlords and tenants should know the law to determine their appropriate
actions. This article shall outline the basic law and give some practical
advice.
THE BASIC LAW OF
SECURITY DEPOSITS IN CALIFORNIA:
California law specifically allows
the landlord to use a tenant's security deposit for four purposes:
1. For unpaid rent;
2. For
cleaning the rental unit when the tenant moves out, but only to make the
unit as clean as it was when the tenant first moved in;
3. For
repair of damages, other than normal wear and tear, caused by the tenant
or the tenant’s guests; and
4. If the
lease or rental agreement allows it, for the cost of restoring or replacing
furniture, furnishings, or other items of personal property (including
keys), other than because of normal wear and tear. California Civil Code Section 1950.5 (b)
(e).
A landlord can
withhold from the security deposit only those amounts that are reasonably necessary for these purposes.
The security deposit cannot be used for repairing defects that existed in
the unit before the tenant moves in, for conditions caused by normal wear
and tear during tenancy or previous tenancies, or for cleaning a rental
unit that is as clean as it was when the existing tenant moved in.
What is “normal wear and tear?” There are many cases on the
topic, but essentially it comes down to the normal decay of carpets,
walls, fixtures, etc that time can create when the property is used for
the purpose it was leased for. For instance, walls have to be repainted
every few years and the landlord cannot expect the tenant to pay for
that. However, if a tenant installed a special entertainment system that
damaged the wall when removed, the landlord can probably deduct the cost
of repair and painting from the security deposit. (CC 1950.b (b) (e).
Note that a
rental agreement or lease can never state that a security deposit is
“nonrefundable." CC 1950.5 (m). Such a clause is void under the law.
Under California
law, within 21 calendar days after
the move, the landlord must either:
1.
Send a full
refund of the security deposit, or
2. Mail or
personally deliver to the tenant an itemized statement that lists the
amounts of any deductions from the security deposit and the reasons for
the deductions, together with a refund of any amounts not deducted. (CC
1950.5 (g) (2) (effective January 1, 2004)
The landlord also
must send copies of receipts for the charges that the landlord incurred
to repair or clean the rental unit and that the landlord deducted from
the security deposit. The landlord must include the receipts with the
itemized statement.
The landlord must also follow
these rules:
1. The landlord or
the landlord’s employees did the work – The itemized statement must
describe the work performed, including the time spent and the hourly rate
charged. The hourly rate must be reasonable.
2. If another
person or business did the work – The landlord must provide copies of
the person’s or business’ invoice or receipt. The landlord must provide
the person’s or business’ name, address and telephone number on the
invoice or receipt, or in the itemized statement.
3. If the landlord
deducted for materials or supplies – The landlord must provide you a
copy of the invoice or receipt. If the item used to repair or clean the
unit is something that the landlord purchases regularly or in bulk, the
landlord must reasonably document the item’s cost (for example, by an
invoice, a receipt or a vendor’s price list). (CC Section 1950.5 (g) (2)
effective January 1, 2004.)
4. If the landlord made a
good faith estimate of charges – The landlord is allowed to make a
good faith estimate of charges and include the estimate in the itemized
statement in two situations:
(1) the repair is being done by the landlord or
an employee and cannot reasonably be completed within the 21 days, or
(2) services or materials are being supplied by
another person or business and the landlord does not have the invoice or
receipt within the 21 days.
In either
situation, the landlord may deduct the estimated amount from the security
deposit. In situation (2), the landlord must include the name, address
and telephone number of the person or business that is supplying the
services or materials.
Within 14 calendar
days after completing the repairs or receiving the invoice or receipt,
the landlord must mail or deliver to the tenant a correct itemized
statement, the invoices and receipts described above, and any refund to
which the tenant is entitled. CC 1950.5(g) (1).
The landlord must
send the itemized statement, copies of invoices or receipts, and any good
faith estimate to the tenant at the address that the tenant provides. If
the tenant does not provide an address, the landlord must send these
documents to the address of the rental unit that the tenant just vacated.
Note that the
landlord is not required to send copies of invoices or receipts, or a
good faith estimate, if the repairs or cleaning cost less than $126 or if
the tenant has waived the right to receive them. CC 1950.5 (g) (4).
(Effective January 1, 2004)
If the landlord
fails to either mail a full refund or the required statement of
deductions within 21 days as required by law the landlord loses the right
to keep any of the security deposit and
must return the entire deposit to the tenant. Granberry v Islay
Investments (1995) 9 Cal 4th, 738.
“REASONABLE WEAR
AND TEAR”: THE USUAL FIGHT
The most common
cause of disputes over security deposits pertains to the landlord
insisting that damage was caused that should allow deductions from the
security deposit and tenants insisting the damage was merely to be
expected over time or that the condition already existed when the tenant
arrives. Are there any guidelines that can help?
Recall that
California's security deposit statute specifically allows the landlord to
use a tenant's security deposit for the four purposes stated above. The
statute limits the landlord's deduction from the security deposit to an
amount that is "reasonably necessary" for the listed purposes.
Unfortunately, the statute's terms "reasonably necessary" and
"normal wear and tear" are vague and mean different things to
different people.
The following
suggestions are offered as practical guides suggested by the
CALIFORNIA DEPARTMENT OF CONSUMER AFFAIRS for dealing with security
deposit issues. While these suggestions are consistent with the law, they
are not necessarily the law in this area.
1. Costs
of cleaning - A landlord may
properly deduct from the departing tenant's security deposit to make the
rental unit as clean as it was when the tenant moved in. CC 1950.5 (b)
(3) for units in which the tenancy began after January 1, 2003.
A landlord cannot
routinely charge each tenant for cleaning carpets, drapes, walls, or
windows in order to prepare the rental unit for the next tenancy.
Instead, the landlord must look at how well the departing tenant cleaned
the rental unit, and may charge cleaning costs only if the departing
tenant left the rental unit (or a portion of it) less clean than when he
or she moved in.
Reasonable cleaning
costs would include the cost of such things as eliminating flea
infestations left by the tenant's animals, cleaning the oven, removing
decals from walls, removing mildew in bathrooms, defrosting the
refrigerator, or washing the kitchen floor. But the landlord could not
charge for cleaning any of these conditions if they existed at the time
that the departing tenant moved in. In addition, the landlord could not
charge for the cumulative effects of wear and tear.
Suppose, for
example, that the tenant had washed the kitchen floor but that it remained
dingy because of wax built up over the years. The landlord could not
charge the tenant for stripping the built-up wax from the kitchen floor.
2. Carpets
and drapes - "useful life" rule - Normal wear and tear to carpets, drapes and
other furnishings cannot be charged against a tenant's security deposit.
Normal wear and tear includes simple wearing down of carpet and drapes
because of normal use or aging, and includes moderate dirt or spotting.
In contrast, large rips or indelible stains justify a deduction from the
tenant's security deposit for repairing the carpet or drapes, or
replacing them if that is reasonably necessary.
One common method
of calculating the deduction for replacement prorates the total cost of
replacement so that the tenant pays only for the remaining useful life of
the item that the tenant has damaged or destroyed. For example, suppose a
tenant has damaged beyond repair an eight-year-old carpet that had a life
expectancy of ten years, and that a replacement carpet of similar quality
would cost $1,000. The landlord could properly charge only $200 for the
two years' worth of life (use) that would have remained if the tenant had
not damaged the carpet.
3. Repainting
walls - One approach for
determining the amount that the landlord can deduct from the tenant's
security deposit for repainting, when repainting is necessary, is based
on the length of the tenant's stay in the rental unit. This approach
assumes that interior paint has a two-year life. (Some landlords assume
that interior paint has a life of three years or more.)
Length
of stay Deduction
Less
than 6 months full
cost
6 months to 1 year two-thirds
of cost
1 year to 2 years one-third
of cost
2 or more years no
deduction
Using this
approach, if the tenant lived in the rental unit for two years or more,
the tenant could not be charged for any repainting costs, no matter how
dirty the walls were.
4. Other
damage to walls - Generally,
minor marks or nicks in walls are the landlord's responsibility as normal
wear and tear (for example, worn paint caused by a sofa against the wall).
Therefore, the tenant should not be charged for such marks or nicks.
However, a large
number of holes in the walls or ceiling that require filling with
plaster, or that otherwise require patching and repainting, could justify
withholding the cost of repainting from the tenant's security deposit. In
this situation, deducting for painting would be more likely to be proper
if the rental unit had been painted recently, and less likely to be
proper if the rental unit needed repainting anyway.
Generally, large
marks or paint gouges are the tenant's responsibility.
Relief Available
Practically speaking, a tenant has two options if the landlord
does not honor the 21-day rule. The first step for both is to call and
write the landlord to request a refund of the entire security deposit as
described pursuant to the law above. At that point either a settlement is
reached or litigation, mediation
or arbitration will
ensue, depending on the lease between the parties.
Another option is
to sue the landlord in Small Claims Court for return of the security
deposit. It should be noted that in that forum the landlord then could
file a counterclaim against the tenant as well. In the counterclaim, the
landlord can assert a right to make deductions from the deposit, for
example, for unpaid rent or for damage to the rental that the landlord
alleges that the tenant caused. Both parties then will have to argue to
the judge why he or she is entitled to the deposit.
Initial
Inspection Before Tenant Moves Out
A tenant may ask
the landlord to inspect the rental unit before the tenancy ends to
identify defects or conditions that justify deductions from the tenant's
security deposit. The purpose of this "initial inspection" is
to give the tenant an opportunity to repair the defects or do the
cleaning identified during the inspection in order to avoid deductions
from the tenant's security deposit. The tenant has the right to be
present during the inspection.
The landlord must
perform an initial inspection if the tenant requests it, but cannot make
an initial inspection unless the tenant requests it. However, the
landlord is not required to perform an initial inspection if the landlord
has served the tenant with a three-day notice (an eviction notice)
because the tenant has failed to pay the rent, violated a provision of
the lease or rental agreement, materially damaged the property, committed
a nuisance, or used the property for an unlawful purpose. CC Section 1950.0 (f) (1)
(effective January 1, 2004).
Landlord's
notice
The landlord must
give the tenant written notice of the tenant's right to request an
initial inspection of the rental and to be present during the inspection.
The landlord must give this notice to the tenant a "reasonable
time" after either the landlord or the tenant has given the other
written notice of intent to terminate (end) the tenancy. If the tenant
has a lease, the landlord must give the tenant this notice a
"reasonable time" before the lease ends. If the tenant does not
request an initial inspection, the landlord does not have any other
duties with respect to the initial inspection.
Scheduling the
inspection
When the tenant
requests an initial inspection, the landlord and the tenant must try to
agree on a mutually convenient date and time for the inspection. The
inspection cannot be scheduled earlier than two weeks before the end of
the tenancy or lease term. In any event, the inspection should be
scheduled to allow the tenant ample time to perform repairs or do
cleaning identified during the initial inspection. The landlord must give
the tenant at least 48 hours' advance written notice of the date and time
of the inspection whether or not the parties have agreed to a date and
time for the inspection.
Based on the
inspection, the landlord or agent must prepare an itemized statement
of repairs or cleaning that the landlord or agent believes the tenant
should perform in order to avoid deductions from the tenant's security
deposit. The landlord or agent must give the statement to the tenant if
the tenant is present for the inspection, or leave it inside the unit if
the tenant is not present. The landlord or agent also must give the
tenant a copy of California's security deposit statute, which lists
lawful uses of tenants' security deposits.
This statute has
the effect of limiting the kinds of repairs or cleaning that the landlord
or agent may properly include in the itemized statement. Because of this
statute, the landlord cannot, for example, use the tenant's security
deposit to repair damages or correct defects in the rental that existed
when the tenant moved in or that are the result of ordinary wear and
tear.
Since the landlord
cannot use the tenant's deposit to correct these kinds of defects, the
landlord or agent cannot list them in the itemized statement.
Tenant’s Right
to Repair
Before the tenancy
ends, the tenant may make the repairs or do the cleaning described in the
itemized statement, as allowed by the rental agreement, in order to avoid
deductions from the deposit. However, the tenant cannot be required to
repair defects or do cleaning if the tenant's security deposit could not
be used properly to pay for that repair or cleaning.
Legal
Relief Available
Legal actions for obtaining
refunds of security deposits are available and a penalty against a
Landlord who fails to comply with the law is available. Assuming one
wants to use Small Claims Court (where no attorneys are allowed to argue)
the maximum amount that can be recovered is ten thousand dollars, the
maximum jurisdictional amount in small claims. (The tenant, even if the
claim is for more than ten thousand dollars can waive the extra amount
and still use the Small Claims Court.) For amounts greater than $10,000,
the tenant must file in superior court. Note that normally the landlord
has the burden of proving that his or her deductions from the security
deposit were reasonable. You can file as many claims as you would like for up to $2,500 each, but you are only able to file two claims in a calendar year that ask for more than $2,500.
If the tenant can
prove to the court that the landlord acted in "bad faith" in refusing to return the
appropriate security deposit, the court can order the landlord to pay the
amount of the improperly withheld deposit, plus up to twice the amount
of the security deposit as a "bad faith" penalty. The court
can award a bad faith penalty in addition to actual damages whenever the
facts of the case warrant - even if the tenant has not requested the
penalty. CC 1950.5 (l).
These additional
amounts can also be recovered if a landlord who has purchased a building
makes a "bad faith" demand for replacement of security
deposits. The landlord has the burden of proving the authority upon which
the demand for the security deposits was based.
Whether either
party can collect attorney's fees if that party wins such a suit depends
on whether the lease or rental agreement contains an attorney's fee
clause. If the lease or rental agreement contains an attorney's fee
clause, the winning party can claim attorney's fees as part of the
judgment, even if the clause states that only the landlord can collect
attorney's fees.
Conclusion
Attorneys seldom
become directly involved in these types of disputes since the amount
normally does not justify their fees. Absent an attorney’s fees clause as
described above, the average attorney bill will cost more than the amount
in dispute.
For that reason,
the overwhelming majority of parties informally settle their claims or
fight them out in Small Claims Court. And most fights can be avoided
entirely by use of the inspection method described above and by some
common sense compromise.
We have found,
however, that more than most disputes, arguments as to the Security
Deposit can escalate into truly intense confrontations in which emotions
overcome thinking and the parties spend tens of hours and thousands of
dollars fighting over a few hundred dollars in cost of paint, etc.
Chose the fight
carefully. In many court systems, most notably San Francisco and
Berkeley, there is a prejudice against landlords that can make their
appearance in court a decision later greatly regretted. Even in more
“even” legal systems in which the courts are not inclined to favor the
tenant, few judges enjoy hearing about who failed to clean an oven or
paint a wall.
The writer well
remembers one friend who, furious at the landlord’s refusal to return a thousand
dollars due to a stained rug, spent two dozen hours preparing a case
complete with pictures, a video and experts, and was astonished to look
up during the presentation to see the judge reading a pleading from
another case while supposedly listening to the evidence so painfully
prepared by my friend.
Over a beer the
next day he was complaining bitterly when I pointed out to him that no
one aside from the landlord and he really cared about whether the stain
came from pizza or the previous tenant’s earlier pet dog and that he had
lost track of priorities.
“Yeah, but I cost
the landlord a bundle, I can tell you. He lost his entire day in court
and had to give me the thousand dollars.”
“Fine. So, what’s
the complaint?”
“It cost me more
than that in lost work time and no one paid me for the hours I spent to
prepare the case, It’s not fair.”
And I told him what
I tell clients in cases large and small. “Courts are about money and
power. Courts can’t give you more than money and only the money the law allows.
You want fairness? Try some other forum. Churches abound.”
He laughed and
drank some more beer and talked of baseball…and I knew his priorities had
at last returned.
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