When House is Sold, Who's Deposit Repository?

When House is Sold, Who's Deposit Repository?

Robert Griswold | Steven R. Kellman | Ted Smith
28-Feb-1999 Sunday

This column on issues confronting renters and landlords is written by Counselor of Real Estate and Certified Property Manager Robert Griswold, host of Real Estate Today! with Robert Griswold (10 a.m. Saturdays on AM1130 - KSDO radio, or on the Internet at www.retodayradio.com), and by attorneys Steven R. Kellman, director of the Tenants' Legal Center, and Ted Smith, principal in a law firm representing landlords.

Q: I have a lease that will expire in five months. If my landlord sells the house prior to my lease expiring what is his liability concerning my $1,200 security deposit? When and how do I get the deposit back?

A: Griswold: Under California Civil Code, it is the responsibility of your current landlord to provide you with written notification of the transfer of your security deposit to the new owner (including name and address and the amount of the deposit transferred).

Of course, your new landlord will then be responsible to you for the disposition of that deposit when you ultimately leave the premises.

This is a further reminder of the importance for the tenant to accurately document the condition of the rental upon move-in. Unfortunately, many tenants whose tenancy bridges two owners are shocked when they incur deductions to their security deposit for damages beyond ordinary wear and tear that the original landlord has failed to disclose to the new landlord.

Smith: Here's my advice to California landlords. When selling a rental property, there are two options when dealing with the security deposit.

First is transfer and notice. The selling landlord may include the security deposit as part of the property sale to the buyer. The seller transfers the deposit to the buyer and the buyer assumes responsibility for it. The tenant must be notified in writing that:

the building has been sold

what claims, if any, the seller is now making against the security

the amount of the security deposit

the name, address and phone number of the buyer

The other option is return of the security deposit. The selling landlord can return the deposit to the tenant prior to the close of escrow. This option is not used very often, since it leaves the buyer "bare," with no security deposit on account.

The selling landlord's written notice is delivered to the tenant and the buyer at the close of escrow. If the seller gives proper notice to the tenant and the buyer, the security deposit obligation then passes to the buyer, who becomes solely responsible for the deposit after the close of escrow. If the buyer fails to return the deposit after the tenant's lease expires, then the buyer is the one legally responsible for return of the security deposit.

Q: My last landlord withheld $250 of a $1,000 deposit for carpet shampooing and replacing irrigation sprinkler heads.

These are items that I believe are normal maintenance. We vacuumed and cleaned the house well and thought that things such as carpet shampooing, etc. were the responsibility of the landlord. As for the irrigation sprinkler heads, they were all working when we left the house. However, it
was vacant for a while before being rerented.

Do we have recourse or are we being picky? Also, the landlord mistakenly let me know that she doesn't report the rental income on her income taxes and I just might report her to the IRS! Would that be considered extortion?

Smith: Let me first remind you that California landlords have every right to deduct refurbishing and cleaning costs from your security deposit before returning the balance to you.

As to the carpet, it appears that you thought vacuuming was good enough. Apparently, your landlord disagreed. As a result, the landlord was required to take the carpet cleaning to the "next level" -- shampooing. Under these circumstances, the shampooing expense is not a normal maintenance item to be absorbed by the landlord -- its cost may be lawfully taken from the deposit so long as it was reasonably necessary. It's possible that stains and odors in the carpet could have contributed to the need for shampooing.

The sprinkler head deductions are a tougher problem. If they were working after you moved out, then I would agree that you should not have been charged for installation of the new heads. Ask for the return of this portion of your security deposit.

As to the Internal Revenue Service, you have the right to report possible tax fraud. But, turning the landlord in to the IRS will not help you get your security deposit back. It's a separate issue.

Kellman: Generally, when you vacate a rental, you must take the dirt out that you brought in. In this case, that means shampooing is required since vacuuming is not enough to really clean a carpet. I do not believe that dirt is "normal use" or "ordinary wear and tear."

Many tenants do not shampoo the carpet because it is old and they feel it will not come clean anyway. This would be a mistake. Sometimes based on normal use, the carpet suffers greater wear on high traffic areas and the carpet will simply not be restored to its original condition regardless of
any cleaning. Older carpet may not come clean either. Therefore, you need only do a basic shampooing to satisfy the law.

Special treatments and coatings commonly sold during carpet cleaning jobs are not necessary. You need not worry about the aged condition of the carpet since that is not your responsibility.

If the sprinklers functioned normally when you moved out, any damage which occurred when the house was vacant is not your fault. Irrigation systems commonly need routine replacement of sprinkler heads. Your landlord may simply be trying to make you pay for maintenance for which he is responsible.

As to the IRS, of course you may report what you feel is appropriate; however you should not use such a threat to the landlord to coerce any payment to you.

Q: Recently, a family member awoke to find that our apartment was flooded from a leak in the toilet tank. We hurriedly removed as much furniture as we could and contacted the management.

The carpet had to be completely removed and fans set up to dry out the apartment. Before the apartment and carpeting were completely dry, the manager insisted that our furniture be moved back into our unit since the weekend was approaching and the maintenance staff didn't work on weekends and the owner refused to pay overtime.

The unit was uninhabitable and we were forced to stay in a motel. The owner refuses to reimburse us for our lodging and meal expenses. Can he do this?

Kellman: The landlord is probably responsible for the leak in the toilet tank unless it can be shown that you caused the problem by misuse or abuse. You acted correctly by immediately contacting the landlord and taking measures to protect your furniture.

The landlord did not handle the matter as well. Flooding cannot be ignored even if it occurs at inconvenient times. The damage from a flood is just as bad on a Monday morning as it is on a Saturday night and can be made worse by failing to promptly take corrective measures.

The mere fact that the flood was before a weekend is no excuse to make the matter worse by a conscious failure to act just to save money. Even if the flooding was not the fault of the landlord, failing to act properly can cause additional damage for which the landlord should be held responsible.

Many companies work around the clock to handle such emergencies, but they cost more than the hourly wage paid to a maintenance worker. Your landlord should have used one.

While your landlord may or may not be responsible for the initial flooding, he should be held liable for all the inconvenience and expenses caused by delaying corrective action.

Smith: I disagree with Steve when he says the landlord did not handle the matter very well. I believe the landlord acted reasonably under the circumstances. First, we don't even know that the landlord is legally liable for the flood. Some losses -- maybe this flood -- cannot be pinned on the landlord. Renters must take responsibility for their own flood damages, that's why renter's insurance is encouraged.

If the landlord is responsible, it's my opinion that he is only required to give credit for unearned rent during the flood period. Asking the landlord to reimburse you for your hotel bills and meals is more than the court would allow.

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 120191, San Diego, CA, 92112-0191. Or you may e-mail them at rgriswold@retodayradio.com

Back to 1999 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