No Need for Deposit Account

Question: Must the owner place security deposits into a separate account? Must this account be interest-bearing for the benefit of the tenants?

Property manager Robert Griswold replies:

The owner is not required to place the deposit into a separate account but must be able to properly return the security deposit (after making lawfully allowed deductions) within 21 days as required by California law.

There are currently no requirements for owners to pay interest on security deposits unless you live in select rent-controlled areas.

Attorney Ted Smith replies:

There is no requirement that your rental owner place the security deposit into either a special or an interest-bearing account. Tenant groups have unsuccessfully lobbied California lawmakers to force landlords to pay interest on security deposits. There is no bill pending before the legislature at this time. On your departure, all the landlord has to do is return your deposit after any lawful deductions.

California real estate brokers need to be a little careful regarding security deposits. The California Department of Real Estate requires licensed brokers to maintain trust accounts for client moneys. . This includes licensed property management firms, which hold tenants’ security deposits.

Tenant’s rights attorney Steven R. Kellman replies:

Landlords need not place security deposits in separate interest-bearing trust accounts, although there should be a law requiring it. Since there is no such law here in California, many landlords simply use the deposits for their own purposes. In other words, they spend them. When it is time to refund a deposit, they are faced with having to return money that they have already spent. Some then play the deposit deduction game. This game is played by the landlord who “finds” deductions such as cleaning, damages and rent owed to justify keeping the deposit.

For example, there may be a large cleaning charge when the tenant spent the whole day cleaning the place. Costs may be charged for items that just wore out from age, or maybe deductions were taken for repairing something that was broken from the beginning of the tenancy. Sound familiar?

Of course, many landlords sincerely try to follow the deposit law. If the deposits were kept in a trust account, however, more landlords would be less likely to play the game since the money would be right there and not already spent when it is time to make that refund.

Remember, a security deposit may be used to pay rent left owing after moving out, damages beyond normal use or cleaning. Tenants should protect their deposits by following some simple steps. Be sure to document damages upon moving in, and let the landlord know about anything that needs repair from normal use during the tenancy. Upon moving out, have the place professionally cleaned (including the carpets) and get a receipt showing the work was done. It may cost a little, but it will save a lot in deposit deductions.

Fading Romance Not Grounds to Break Lease

Q: Late last year, I moved into a home and signed a long-term lease with my boyfriend. The relationship is not working out. If we were able to advertise and find new tenants, could we break our lease and receive the security deposit back?

Griswold replies:

Sorry, but relationship problems do not qualify as grounds for legally breaking a lease. Contact your landlord and see if he will cut you any slack. In today’s rapidly escalating rental market, the landlord may even be able to rent your place for more money and will let you cancel the remainder of your lease.

Check your lease carefully to see if you are allowed to sublease, but 99% of all California leases prohibit subleasing without owner approval (which is not likely to be granted). Otherwise, you and your boyfriend are responsible for the entire amount of the rent each and every month until the owner re-leases the property.

The landlord must handle the security deposit in compliance with California Civil Code section 1950.5 and provide an accounting and any balance after deductions within 21 days.

Smith replies:

Your landlord has every right to expect full performance of the lease from both of you. Your personal problems with your boyfriend/roommate are not the landlord’s.

If you give your landlord authorization, he will try to rent the apartment to qualified replacement tenants. You and your boyfriend will remain responsible until the house is re-leased. You also may be held responsible for advertising and marketing expenses. Unless the landlord is able to get someone else in there right away, it’s unlikely that you will receive your security deposit back.

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This column is written by property manager Robert Griswold, host of “Real Estate Today”’ (KSDO-AM [1130], 10 a.m. to noon Saturdays); tenant’s rights attorney Steven R. Kellman, director of the Tenants’ Legal Center; and Ted Smith, principal in a law firm representing landlords.

If you have a question, send it to Rental Roundtable, Real Estate section, L.A. Times, 202 W. 1st St., L.A., CA 90012. Or you may e-mail the columnists at rgriswold.latimes@ retodayradio.com. Questions should be brief and to the point and cannot be answered individually.