About that Security Deposit…

One of the most common challenges for those who rent housing is the security deposit. In California the landlord can demand two months rent up front. That is in addition to the last month’s rent. And the landlord may also require a pet deposit or a key deposit or whatever. The average prospective tenant looking for a one-bedroom apartment in Beverly Hills could hand over $6,000 at lease signing; the average 3-bedroom may require $12,000 down.

On the front end, the security deposit can be a barrier to renting. On the back end it can be a source of grief. The law allows for deductions from the deposit under some circumstances such as when the apartment is damaged or left uncleaned. The unprofessional or unscrupulous landlord, though, will take advantage of the fact that the deposit is already in his hands. With sufficient tenant turnover it becomes an additional source of income. After a longtime tenant vacates it could pay for new kitchen cabinets.

That said there are legitimate reasons to deduct from the security deposit. The landlord may incur a cost to return the apartment to repair damage caused by the tenant (beyond normal wear and tear) or to restore it to the state of cleanliness when it was rented. The landlord may also be stuck with unpaid rent or utility charges owed by the tenant. The security deposit plays an important role in protecting the landlord and if both parties are honorable then the deposit is not usually an issue.

What the Law Says

The California Civil Code states plainly the reasons for which a landlord cannot withhold a deposit or any part of it:

The landlord may not assert a claim against the tenant or the security for damages to the premises or any defective conditions that preexisted the tenancy, for ordinary wear and tear or the effects thereof, whether the wear and tear preexisted the tenancy or occurred during the tenancy, or for the cumulative effects of ordinary wear and tear occurring during any one or more tenancies. — Civil Code § 1950.5(e)

The law is clear on two things:

  1. The landlord cannot charge the departing tenant for damage prior to that tenant’s occupancy;
  2. The security deposit cannot be deducted to replace fixtures or furnishings that show ordinary wear and tear. (For example, the landlord cannot withhold from the security deposit the cost of painting the apartment if the tenant was resident for a brief time or did not damage the paint.) Property maintenance is not the responsibility of the tenant; that’s why she pays rent.

However “ordinary wear and tear” is a subjective standard. The landlord also knows that “clean” is a subjective standard. Moreover, the landlord knows from experience that no matter the standard, not all tenants had properly documented the apartment condition upon move-in and so arguing the standards gives the landlord much wiggle room.

Of course there will be tenants will do know how the law treats deposits. Or what they can do to counter a questionable claim that is the basis for a deduction from the deposit. A landlord can take advantage of an unknowing tenant by bullying or even by not responding. The unscrupulous landlord’s  most important ally is inertia: the tenant must take affirmative action to recover money that is already in the landlord’s pocket.

Some tenants may want to move on with life and so don’t challenge the landlord. Others may be intimidated. Some will not want to ask the landlord to participate in mediation or may be reluctant to take the issue to small claims court. That is understandable, but it rewards the unscrupulous landlord for unlawfully keeping a tenant’s deposit.

Let’s look at some of the basics of the security deposit and then move on to suggested remedies and finally to self-protection.

Security Deposit Basics

The total deposit for an apartment cannot be more than the equivalent of two months rent. That includes any cash security for any other purpose. For example, the landlord can ask for a security deposit and also a key deposit and a pet deposit. However they cannot total more than two months rent.

A deposit taken for a specific purpose (like keys or pets) cannot be commingled with the principle security deposit. For example, if keys are returned then so is the key deposit regardless of any other claim the landlord makes. Likewise, the pet deposit is returned if there is no pet-specific damage. For these and more specifics refer to the California Tenants Guide (starting on p. 24).

No part of any security deposit is non-refundable. And the tenant can’t consent to a nonrefundable deposit. The deposit must be refunded unless the landlord incurs actual costs to return an apartment to the condition in which it was rented or to recover unpaid rent and utility charges. If there is no such legitimate charge then there is no deduction from the deposit.

The landlord is required to return the deposit within 21 days after the tenant vacates. If any amount of the deposit is withheld, the landlord must support his deduction with a written, itemized statement in person, by mail to the forwarding address, or to the address of the vacated unit. It must state the reason for any deduction. For any deduction over $125 the itemized list of deduction(s) must include:

  • Any bill, invoice or receipt and it must includes the name, address, and telephone number of the contractor;
  • For work performed by the landlord himself a statement that “reasonably” describes the including the time spent, the hourly rate that was estimated, and receipts for materials or supplies.
  • For work not completed within the 21 days after vacation, that the tenant receive a “good faith estimate” of charges and deductions then provide the actual bill, invoice or receipt within 14 days after the repair is completed.

The tenant should scrutinize the landlord’s accounting. Is the deduction reasonable? Are the receipts and documentation in order? If that document is insufficient, the tenant should ask for additional documentation from the landlord within 14 days of receiving the statement. The landlord must comply within 14 days of receiving the tenant’s request. If the landlord is not responsive the tenant can present that evidence in court.

What if the Security Deposit is Improperly Withheld?

The law is clear on the purpose of the deposit and the deadline for refunding the deposit to the tenant. But Renters Alliance frequently hears from tenants who have a problem getting their money back. She cannot get a proper accounting for deposit deductions, say, or she receives no documentation upon request. Some landlords simply refuse to respond even after the 21 days specified by law elapses. Clearly the unscrupulous landlord can game the system.

Should a dispute arise over the deposit, the tenant’s best option is to first contact the landlord. Find out why the deposit was not returned. In writing. Document all communication with the landlord including email correspondence, texts, and careful notes following a phone conversation. It is always a good idea to memorialize the conversation immediately afterward. The landlord’s statements may be important evidence should you later seek a court remedy.

Request the itemized statement mandated by law (if one has not been provided) and scrutinize it carefully. Does it correspond to the unit condition? Does the documentation look in order? Are there questionable ‘costs’ for work done not by a professional but by the in-house handyman or the landlord himself? Expenses without legitimate receipts is a red flag and it may provide support for a claim later in court.

If the dispute remains unresolved, inform the landlord that he is unlawfully keeping the deposit. Formally request in writing the return of the disputed portion of the deposit (along with a rebuttal on specific deductions, if any). Carefully document this request for the deposit (or some portion thereof) because 1) it is a precondition for court and the court will ask for proof; and 2) the landlord’s response may provide support for a claim to the deposit.

If the landlord remains uncooperative or uncommunicative then request professional mediation. Contact the rent stabilization office at (310) 285-1031 or by email to ask. It is not binding or obligatory, but if the landlord is invited to participate and he declines then that provides support for a later claim in court.

The next and last stop in a deposit dispute will be small claims court. Here the prior documentation of the contacts with the landlord will come in handy when presenting the claim to the judge. Read more about filing a claim in our own Small Claims: A Tenant’s Guide.

Last, there are a couple of other tools at the tenant’s disposal before it gets to the courtroom.

The new rent stabilization office provides some oversight of landlords in Beverly Hills. Clear-cut cases of malfeasance should be brought to their attention. Reach the RSO office at (310) 285-1031. If they say they can’t help with deposits, be sure to emphasize that the landlord’s business practice warrants at least some attention.

Also, contact the city’s business office and ask about the status of the landlord’s business license. Every landlord should be licensed to do business in Beverly Hills — even those who rent out a single-family home or condominium. Ask if there is an opportunity to make a complaint about the landlord’s business practice.

One last suggestion: if your treatment appears to be part of a pattern of abuse of the deposit, let’s make it an issue for City Council. Contact Renters Alliance and we will see if we can’t connect some dots and bring such business practices to the attention of officials. Look what that did for ending no-just-cause eviction!

Tenant, Protect Thyself!

The best way to head off any dispute about the security deposit is to protect thyself against landlord malfeasance. That can happen at the outset of the tenancy with a careful evaluation of the apartment and walk-through with the landlord; and it can happen before the conclusion of the tenancy with a mandatory walk-through inspection at the tenant’s request. Let’ start with the final inspection.

Ask for a final inspection within the two weeks prior to vacating the apartment. The key here is to avoid a surprise when the landlord withholds the deposit in whole or in part.

The law requires the landlord to perform an inspection prior to tenant move-out upon the tenant’s request. The purpose of the inspection is to give the tenant an opportunity to correct conditions that would warrant a deduction from the deposit. The law states it plainly:

Within a reasonable time after notification of either party’s intention to terminate the tenancy, or before the end of the lease term, the landlord shall notify the tenant in writing of his or her option to request an initial inspection and of his or her right to be present at the inspection… At a reasonable time, but no earlier than two weeks before the termination or the end of lease date, the landlord, or an agent of the landlord, shall, upon the request of the tenant, make an initial inspection of the premises prior to any final inspection the landlord makes after the tenant has vacated the premises. The purpose of the initial inspection shall be to allow the tenant an opportunity to remedy identified deficiencies, in a manner consistent with the rights and obligations of the parties under the rental agreement, in order to avoid deductions from the security. If a tenant chooses not to request an initial inspection, the duties of the landlord under this subdivision are discharged. If an inspection is requested, the parties shall attempt to schedule the inspection at a mutually acceptable date and time. The landlord shall give at least 48 hours’ prior written notice of the date and time of the inspection if either a mutual time is agreed upon, or if a mutually agreed time cannot be scheduled but the tenant still wishes an inspection. The tenant and landlord may agree to forgo the 48-hour prior written notice by both signing a written waiver. The landlord shall proceed with the inspection whether the tenant is present or not, unless the tenant previously withdrew his or her request for the inspection — Civil Code 1950.5 (f)

The tenant need not be present but it is a good idea. In any case, the landlord must provides the tenant with a written, itemized statement (‘punch list’) of outstanding problems. Once corrected the deposit should be returned in its entirety. (If the tenant is not present, the landlord or his agent must leave the punch list behind.)

The tenant should be prepared with an inventory checklist (if completed at move-in — see below). The tenant should also thoroughly document conditions at move-out with images dated and captioned. A conversation with the landlord or his agent is invaluable. Be sure to take notes then or immediately afterward. The well-prepared tenant is the one least likely to be surprised by deductions from the deposit.

Keep in mind, though, that the tenant has a ‘duty of care’ under the law and must refrain from causing damage or making alterations without approval from the landlord. The landlord can not only keep the deposit but can also demand additional damages too for repairs. Yes, the landlord can counter-claim in small claims court!

When looking at any apartment, think like an inspector. Have an eye for detail: does it look properly maintained? Do the fixtures function properly? Use this handy habitability checklist [pdf] to check the hot water, heat, electric plugs and more.

Mold is a serious issue, but our rent stabilization ordinance doesn’t address it and state law says only that ‘visible’ mold must be remediated. So pay careful attention to areas around the shower/tub and any spaces that may share a common wall with the bathroom. An oddly textured wall or ceiling may be covering up a past or current water leak. Areas soft or spongy to the touch is the giveaway. Better to discover it sooner rather than argue over it later. The landlord may well argue that you have not kept ‘clean and sanitary conditions.’

(We have seen a lease that obligates the tenant to thoroughly dry out the bathroom after showers. Water damage could arguably be framed as a violation of the rental agreement.)

Upon lease signing, do a walk-through with the landlord or manager. Note the condition of furnishings and fixtures (like appliances). Use the California Tenants Guide inventory checklist [pdf] or the Apartment Owners Association inventory checklist [pdf] to document the condition of paint, carpets, doors, cabinets and fixtures. Get the landlord or manager to sign-off on it. A reputable landlord will want to know what needs fixing. How he approaches it will say much about how he will respond later to problems, and probably how he will treat the tenant’s deposit.

Images are indispensable: take many and file them with a digital copy of your lease. (Back up both in the ‘cloud.’) A little proactive effort will go a long way toward ensuring a smooth tenancy and a clean break once it wraps up.

Closing Thoughts

Most landlords won’t bother to monkey around with the deposit. Cleaning fees should be modest (<$150) and spot-painting for picture-hangar holes and the like billed by the hour (and few hours at that). Stained carpets can be cleaned for a couple of hundreds and they should spot-treat stains as part of that cost. (Read about our experience negotiating a carpet cleaning.)

The tenant who feels like her security deposit is getting hijacked is probably correct. That’s why we have small claims court.

But there are a couple of last things to keep in mind….

Do not assume that any part of the deposit can be applied to the last month’s rent. This is a recipe for trouble! The landlord is entitled to continue to collect rent while the apartment is occupied. Do so only with the written permission of the landlord. Failure to pay rent through the last day in the apartment could prompt an unscrupulous landlord to issue a 3-day notice to begin an eviction for cause.

When an additional authorized occupant (roommate, say) is on the lease, state law allows the landlord to hold the entire deposit until the apartment is vacated. That means that a departing occupant either 1) leaves with no deposit; or 2) the remaining occupant can be expected to pay the departing occupant her share of the deposit. But the remaining occupant could be on the hook for any and all damage beyond ordinary wear and tear.

A tenant with a disability and a live-in caregiver cannot be charged more rent or asked for any additional security deposit given the presence of the care attendant. If the landlord tries to pull that business contact the rent stabilization office or Renters Alliance.

We are always learning about new ways a tenant can be disadvantaged. Do you have a story about a deposit withheld? Contact Renters Alliance. We want to know!