LANDLORD TENANT LAW 101:  SECURITY DEPOSITS

By   David M. Wilson

At the March 6  Membership Meeting, Verne Perry provided  helpful hints about the intricacies of California law on security deposits.  What follows is a digest of Verne’s remarks with some additions based on Berkeley’s rent control ordinance and regulations.  As always, you should consult an attorney regarding specific situations.

 GENERAL RULES

A security deposit may not exceed two months’ rent for unfurnished residential property, or 3 months’ rent for furnished residential property. ). This maximum is in addition to rent for the first month.  In Berkeley,  deposits, once set, may not be increased during the tenancy even if authorized rent ceilings increase.  Also  unique to Berkeley is a requirement that  security deposits  be kept in an interest bearing account, with interest being paid to the tenant annually (or offset against rents) prior to January 10 of the following year.  While there is no prohibition against co-mingling security deposits and other revenues,  you have the burden of proving  that a deposit was made, and of showing what interest was paid on the money.

            Deductions from the security deposit may be made to cure defaults in the payment of rent, or for repairs or cleaning.  Deductions are not allowed to repair damage that results from ordinary use.  Generally, deductions cannot be made for cleaning that results from ordinary use, except for tenancies which first began after January 1, 2003, where you may deduct for “cleaning of the premises … necessary to return the unit to the same level of cleanliness it was in at the inception of the tenancy”.

            No later than three weeks after the resident vacates the rental unit, you are required to provide an itemized statement of the deductions from the resident’s security deposit and to return any remaining balance.

 Special note re roommates, “guests”, and  multiple tenants:  you are only required to return the security deposit when all persons living in the unit have left with all of their personal property.  If for example, your lease is with two individuals, and one leaves after six months, the tenancy continues and you may keep the entire deposit until the second person vacates.  This can be a trap:  when the last tenant leaves you must be careful to distribute the deposit, less deductions, in proportions that should be set in advance  by the lease agreement).  If you simply pay it all out to the last one to leave, you may find yourself having to pay again to persons you thought were out of your life.

 If you deduct more than  $125.00 from the security deposit, you must include copies of the receipts, invoices, etc. which show the charges incurred and deducted.  If you do the work yourself, the itemized statement must describe the work performed, the time spent and a reasonable hourly rate.  Failure to timely send an itemization can result in your losing the right to retain any of the deposit.  If you do not know the exact amount that must be deducted,  you may deduct based on a good faith estimate which must be corrected within 14 days of either completing the work, or receiving the documents the owner must provide copies of the documentation.

While a resident may waive his/her  right to  documentation,  that waiver must be in writing and signed by the tenant within a certain limited period prior to termination of the tenancy (in other words, the waiver found in some form leases is no good).

            The notice must be sent to the address provided by the resident.  If the resident fails to provide a new address, the notice must be sent to the unit that has been vacated.  You should use a “certificate of mailing” to establish proof of mailing. 

RIGHT TO INITIAL INSPECTION

            The law also gives tenants a right to demand  an “initial inspection” within the last two weeks of the tenancy.  A failure to comply with such a request may cost you the right to keep any of the deposit.   Compliance requires as many as six steps.

·         Notify the Resident

You must give the resident written notice of the right to request an initial inspection and to be present at the inspection.  The notice must be given within a reasonable time after either party gives notice of termination of the tenancy or before a fixed-terms lease expires.

§  Schedule an Inspection if Requested

An initial inspection must be scheduled only if the resident requests one. If a resident requests an inspection, you should schedule the inspection at a mutually acceptable date and time.  If the owner and resident are unable to agree on a time to perform the inspection, the owner may select a day and time, no earlier than two weeks before the tenancy ends.

§  Give 48 Hour Advance Notice of Entry

You may enter the rental to perform the inspection only after give a 48 hour written notice of intent to enter.  This is true even if both parties have previously agreed upon a date and time for the inspection.  The notice may be personally delivered to the resident, left at the premises or mailed if the mailing occurs at least six days prior to the date of intended entry.

§  Perform the Inspection

The resident has the right but does not have  to be present during the initial inspection.

§  Leave an Itemized Statement

Based on the inspection, you must give the resident an item