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Thursday, January 27, 2011

Securing Your Security Deposit

When you first move in to a new apartment or home you are renting, you will pay a Security Deposit equivalent to a month or two of rent. When you move out, do you worry about getting it back? As a landlord, do you ever think "what am I really allowed to use this money for?"

First, let's look at your lease. It probably has a section that reads like this:
Security Deposit: Tenant shall deposit with Landlord the Total Deposit in Section X of this Agreement as a Security Deposit to secure Tenant's faithful performance of all of his or her obligations under this Agreement, including the payment of rent, and cleaning and repair of the premises upon surrender.
Essentially, a security deposit is a landlord's best guarantee against risks of rent nonpayment and damage to the premises.

Using the Security Deposit as Rent Payment
The landlord can use the security deposit to remedy tenant's failure to pay rent due to giving insufficient notice to terminate the tenancy. A tenant who vacates on insufficient notice is obligated to pay rent for the minimum notice period beginning when the tenant did give notice, or if no notice was given, beginning when tenant vacated.

Using the Security Deposit to Pay for Repairs
The security deposit can be used in repairing damage to the unit caused by the tenant or by the tenant's guests. This does not include ordinary wear and tear on the unit.

Using the Security Deposit to Pay for Cleaning
The landlord can only keep the amount in the security deposit that is needed to return the unit to the same level of cleanliness it was in at the beginning of the tenancy. 

Landlords: 
  • "Last month's rent". It is better not to label a portion of the security deposit as last month's rent because the tenant may be entitled to forego payment of the final month's rent by deducting it from the amount on deposit. This reduces the amount you can use to make repairs to the unit, and could require litigation against the tenant to get reimbursed for the damage!
  • Tenant's Right to Inspection. Upon notification by either party of intent to terminate tenancy, the landlord must give the tenant written notice of his or her right to request an initial inspection of the unit and to be present during the inspection. [Note: this is not required in three-day notice terminations] Contact an attorney to obtain a proper Notice of Vacating Tenant's Right to Request Initial Inspection form to give to your tenants.
  • Itemized Statement. Based on the initial inspection, the landlord must give the tenant an itemized statement specifying repairs and/or cleaning proposed to be the basis of deductions from the security deposit. Contact an attorney to obtain a form for itemized inspections.
  • Twenty-One Calendar Day Deadline. The landlord must provide the tenant with an itemized statement indicating the basis of any deduction, and refund any remaining portion of the security deposit, no later than 21 days after a tenant's vacancy. [Note: Failure to provide tenant with written accounting of the deducted portion of security deposit could mean that the landlord has to refund the entire security deposit to the tenant]

Renters:

  • Request an Inspection Before You Move Out. The initial inspection is required only if the tenant requests it, after having received notice of the right to request an inspection.
  • Receipts. Tenants should retain receipts or other documentation showing repairs or cleaning performed by the tenant prior to vacating.
  • Demand Security Deposit. Tenants should present the landlord with a formal written demand for a refund of the security deposit to which they are lawfully entitled. Contact an attorney for a Tenant Letter to Landlord Demanding Return of Security Deposit.
Both Landlords and Tenants should:
  1. PHOTOGRAPH the condition of the unit upon the start of the tenancy AND when the tenant vacates.
  2. Landlords: Maintain complete WRITTEN records of all repair and cleaning costs upon which any security amount is based.
  3. Understand that after the initial inspection, but before the tenancy terminates, the tenant must be given an opportunity to repair or clean the identified problems in order to avoid deductions from the security deposit.

Tuesday, January 18, 2011

A Rat Problem: Reason Enough to Withhold Rent?

In a recent issue of the Apartment Owner's Association magazine, a reader (landlord) wrote in stating he began eviction proceedings against a tenant who contested the case by alleging the landlord refused to take care of a rat problem. The reader/landlord asked for suggestions on how to handle the situation in court. The attorney answering that month's question jokingly suggested the landlord tell the judge that the tenant breached the lease by having pets!

Answer
In fact, the tenant can claim that the landlord's failure to take care of the rat problem is an affirmative defense to eviction proceedings! Under such circumstances, the landlord would not be entitled to regain possession of the premises (cannot evict you at that time). In legal terms, this means that the landlord breached the warranty of habitability inherent in a residential tenancy. Your duty to pay rent as a tenant is dependent on the landlord providing you with premises that are habitable.

The Law
In the landmark case of Green v. Superior Court, the California Supreme Court held that a warranty of habitability is implied in ALL residential rental agreements. California statute also prohibits landlords from keeping premises "untenantable". (See Civil Code 1941.1) In our rat problem case, this means that the landlord must keep clean and sanitary premises - building, grounds and common areas that are sanitary and free from rodents and vermin!

However, landlords are not required to make sure the premises are in a perfect, and beautiful condition. There must be a substantial lack of clean and sanitary conditions. For example, the following were determined to be substantial violations:

  • Lack of heat in four of tenant's rooms, vermin, malfunctioning plumbing, collapse and non-repair of bathroom ceiling, bad wiring, and illegally installed stove. (Green v. Superior Court)
  • Hazardous electrical wiring, raw sewage seepage under building, infestation of rats, termites and other vermin, old and broken doors and windows, lack of heat, and leaks. (Rivera v. Sassoon)
  • Wall cracks, peeling paint, water leaks, heating problems, broken windows, and rodents. (Knight v. Hallsthammer)
Although the above cases involve rodents with other terrible problems, an intense rate problem (substantial infestation) could come to the level of a breach by the landlord if the landlord does not take care of the problem.

There must be Notice to Landlord with Opportunity to Repair
The law does not hold landlords accountable for problems that they were not aware of or for problems that would not have been disclosed by a reasonable inspection. Thus, in order to assert a breach of the warranty of habitability the landlord must have notice! This means the tenant must tell the landlord of the rat problem in the apartment. The landlord would also have notice if it is clear through "reasonable inspection" that an apartment or building has a rat infestation. Either way, tenants should always be advised to give written notice to their landlords immediately upon discovering an uninhabitable condition! In this written notice, the tenant should state a specific reasonable deadline for remedy in the notice, after which the tenant can initiate a lawsuit. Sometimes asking an attorney to write the letter on the tenant's behalf will light a fire under the landlord to get the job done sooner.


What to do Next:
If you have rats or other vermin in your building, you should:

  1. Obtain an inspection and report from a local agency (health and safety department, building safety department, or housing department)
  2. Follow up on issuance of the citation
  3. Photograph the conditions
  4. Allow inspection by attorneys if the landlord has not fixed the condition


Beware!
The implied warranty of habitability is not a defense when the "breach" was caused by the tenant! You cannot profit from your own wrong. It is the tenant's responsibility to to repair deteriorations and injuries to the premises caused by her own lack of care. This includes disposing of garbage and other waste in a clean and sanitary manner. Therefore, if a tenant(s) keeps an unsanitary apartment or leaves trash and garbage around the building or outside the dumpster (instead of inside) and this results in the "rat problem", the tenant may not be able to blame the landlord.