Landlord Late With Refund; That's Illegal

16-Mar-1997 Sunday
(Page H-11 )

Robert Griswold, Steven R. Kellman, and Ted Smith

This column on issues confronting renters and landlords is written by Certified Property Manager Robert Griswold, host of KSDO Radio's "Real Estate Management Today!" (Saturdays, 2-4 p.m.) and by attorneys Steven R. Kellman, director of the Tenants' Legal Center, and Ted Smith, principal in a law firm representing landlords.

Q: It has been more than two months since we vacated a home we had rented, and we still have not received any accounting of our security deposit. Our lease states "No later than three weeks after Tenant vacates the Premises, Landlord shall furnish to Tenant an itemized written statement of the basis for, and the amount of, any security deposit received and the disposition of the security, and shall return any remaining portion of the security to the Tenant." We have contacted the landlord via phone and letter. His only comment is that he is still waiting to be billed for some minor damage we did to the home. We don't feel that this is our problem, and he must return our deposit within three weeks per our lease. What is our recourse? Are we entitled to interest for the time elapsed?

A: Kellman: The law requires that the landlord account for, and send whatever refund is due, within three weeks of moving out. Deductions for cleaning and repairs of items damaged in use exceeding normal wear and tear are permitted. Under the security-deposit law, there is a penalty of up to $600 if the landlord has, in bad faith, failed to do that accounting or refund within
the time specified by law. The lease in this case happens to specify the same three-week period as required by law. The parties may agree on a shorter period to return the deposit but not a longer one. Here there were phone calls and letters with no receipt of an accounting or a refund by the landlord even after two months. Thus, the landlord may be guilty of breaking that law and may have to pay the penalty to the tenant. There used to be a provision in the law allowing for interest on deposits held beyond two weeks, but that was eliminated a few years ago. There is no requirement to pay any interest for the time the deposit is held during the tenancy. In this situation, the tenant may file a small-claims case asking for the return of the deposit, the $600 penalty along with attorney's fees (if one was consulted) and court costs.

Griswold: While Mr. Kellman has accurately outlined the security-deposit refund provisions of the California Civil Code, there is another issue that should be discussed. What does a landlord do when the tenant damages the premises in such a way that it will take longer than three weeks to determine the cost of the repairs? Of course, the actual repairs do not have to be completed within three weeks, as the landlord only needs to determine the proper deduction. Routine items such as cleaning and painting are very easy to estimate. However, damages to items such as kitchen or bathroom cabinets can be very difficult to estimate. Under circumstances such as these, it can be difficult for the landlord to respond in the legally prescribed time. While there are no exceptions in the code, typically the small claims court will look to the actual facts of a case concerning the claim that the landlord did not remit the security deposit in a timely manner. I always suggest that the landlord send a detailed preliminary accounting of the security deposit, including as much of the security deposit as possible, and include an explanation as to the status of any pending item(s). Naturally, the landlord must finalize the legally required accounting as quickly as possible and must be able to explain any delay in portions of the security deposit.

Q: My rental home has been for sale for more than a year. It is rented, and the tenants have received a discount for allowing me to show the home and because they will have to move after a 30-day notice when the house sells. I have now sold the home and gave my tenants the required notice in writing. I was just contacted by my tenants and informed that they cannot move until one week after the escrow is due to close. My buyers insist they will cancel the sale if the unit is not vacant since they must immediately move in the day escrow closes in approximately two weeks. I know I have legal remedies, but an unlawful detainer action will take at least three to four weeks and I will lose my sale. What can I do? If I lose the sale, do I have any recourse against my tenant?

A: Kellman: Here the tenant was very fortunate to have had a rent discount to accommodate the inconvenience of showing the house and having to move on a 30-day notice. Many tenants are put through this inconvenience with no such discount at all. The last thing the tenant should do is to create a problem by refusing to move within the 30 days. Such an act could harm or even blow the sale altogether. This may make the tenant liable to the landlord for all damages caused by the lost sale. Further, such actions would show a landlord that it does not pay to try to be fair and accommodating to tenants when marketing properties. Instead, mutual respect and cooperation will serve to benefit both landlord and tenant.

Smith: Your tenant needs to understand that he will have a legal problem if he does not honor the 30-day notice. An unlawful detainer can be filed, but it won't be finished until after the close of escrow -- which could be too late. You might try to get an immediate restraining order from the court authorizing the tenant's removal from the property based on the extenuating circumstances of the escrow. The court might be inclined to order him out immediately without doing the formal unlawful detainer, based on the facts of this case. Let the tenant know that if he causes the loss of the sale, he will be on the receiving end of a lawsuit that will result in substantial damages against him.

Q: My landlord is apparently losing the home I rent to a bank foreclosure for not paying a balloon mortgage. The sale is April 15 and I have several questions. Should I pay my entire rent for April or should I pay only half? What will I owe the bank when it takes over on April 15? What happens to my security deposit? What happens to the $85 I recently paid to get the tree roots out of the sewer line with the promise of reimbursement from the landlord? Also, my landlord (who owes $131,000) wants to sell me this place for $115,000 and a Realtor tells me the market value is between $100,000 and $115,000. Should I buy this home?

A: Griswold: Contact your landlord and offer to pay the full rent for April minus the $85 for the tree roots and a deduction for your security deposit. After the deductions, you may not owe any rent. I would also advise that you send a letter outlining the rent and deductions (attach your receipts) to your landlord to document your understanding. The reason you deduct your security deposit and the $85 now is that unless the current owner transfers your security deposit to the new owner, you will be out of luck because the property is being sold for non-payment (foreclosure). It is my experience as a court-appointed receiver in more than 150 cases that the new owner will not reasonably expect your rent for April if you have already taken care of it with your current landlord. Of course, you must pay the full May rent to the new owner. A foreclosure sale eliminates the responsibility of the new owner for your security deposit.

While your current landlord remains legally responsible, your chances of getting your security deposit and the $85 might also be a problem. As far as buying the home, there are many factors for you to consider in determining a home purchase -- personal needs and finances, location and quality of the home, price, etc. I would suggest you consult with several real estate experts who are actively representing buyers and sellers of homes in the area. You also need to evaluate your own job security and financial situation. I suggest that you consider a book I recently reviewed on the radio show, "Homebuying for Dummies" by Eric Tyson and Ray Brown (IDG Books, Foster City, Calif., 288 pages, $16.99). I don't think you should purchase the home from your landlord unless you pay closer to $100,000 and you have the full agreement of the foreclosing lender. In the industry, this is called a short sale. Other strategies could include going to the foreclosure sale yourself and making a bid (assuming you have the cash or can borrow it quickly), or you can contact the lender after the foreclosure and make an offer. You already live there and if your offer is reasonable, the lender will probably seriously consider it. Good luck!

Q: I rented an apartment and fell behind on my rent. I was served the three-day notice and then an unlawful detainer complaint. I filed an answer, and a hearing date was set. Unfortunately, I got into some trouble with the law (my manager called the police) and I am now in jail, so I missed the hearing. I had my mother go by the apartment, and she indicates that the unit was empty. All of my personal belongings are gone, and the unit has been cleaned and painted. I don't know where my personal property was taken. The manager is apparently in custody of my possessions and has not told me where they are. Is that right?

A: Smith: First, the good news. You have the right to get your possessions from the apartment manager. You might owe the manager back rent, but she may not hold your personal property as "ransom" until you pay it off. The law requires her to follow a certain procedure in handling your personal property after she recovers possession of the premises. If she fails to follow the procedure and just throws your property away, you could go to court to win a judgment for the value of your personal property. Apparently you were in jail at the time of the unlawful detainer trial and, in all likelihood, the court entered a judgment against you granting the landlord possession of the premises and for back rent. You should make immediate arrangements to take care of this judgment so it doesn't go onto your credit report. If there was no damage to the unit, your security deposit will be credited against the amount owed in the judgment.

If You're a Tenant or Landlord, the authors stand ready to answer your questions in this column, although letters cannot be answered individually. Write them at: Rental Roundtable, Homes Section, San Diego Union-Tribune, P.O. Box 191, San Diego, CA, 92112. Or you may e-mail them at rgriswold@retodayradio.com

Back to 1997 Rental Roundtable Index

Robert Griswold and the Real Estate Today! radio show strongly support the intent and the letter of all federal and state fair housing laws. As a reminder to all owners and managers of real estate, note that all real estate advertised is subject to the Federal Fair Housing Act, which makes it illegal to advertise "any preference, limitation, discrimination because of race, color, national origin or ancestry, religion, sex, physical disability, or familial status, or intention to make any such preference, limitation or discrimination." Additional state and/or local fair housing laws may also apply. Be sure to inform all persons that all dwellings offered or advertised are on an equal opportunity basis.

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Revised and Updated - Wednesday, April 26, 2006

Robert S. Griswold, CRE, CPM, CCIM, PCAM, GRI, ARM
Griswold Corporate Center
Griswold Real Estate Management, Inc.
5703 Oberlin Drive, Suite 300
San Diego, CA 92121-1743
Phone: (858) 597-6100
Fax: (858) 597-6161
Email: rgriswold.ret@retodayradio.com