Q&A Regarding Security Deposits and Deductions

Q. When returning a security deposit, what is considered normal wear and tear? A tenant painted a bedroom’s walls black. Can I keep funds from the deposit to repaint? Or no, since I’d repaint between tenancies anyway?

A. Security deposits are meant to help landlords by mitigating tenant expenses at the end of a tenancy. However, they can also be a headache because landlords are obligated to account for deductions to tenants’ security deposits, and the rules for deductions are not always clear.

California clearly designates four specific categories as lawful deductions from security deposits: 1) Repayment of back rent at the end of the tenancy; 2) repair damage to the unit that is not ordinary wear and tear; 3) cleaning the premises to restore it to the condition at the beginning of the tenancy; and 4) to remedy other defaults that may be designated by the rental agreement. However, this is not an exhaustive list, so under the right circumstances, other charges could conceivably be justified.

The law has no further explanation of the meaning of “ordinary wear and tear,” so for landlords it will always be a judgment call. Along with personal experience, landlords can consider the expected useful life for the various appliances and fixtures inside each unit. If the carpet, paint, or stove need to be replaced prematurely, it suggests that they were damaged beyond “ordinary wear and tear.”

In the given example, whether repainting a bedroom would be deductible from the deposit would depend primarily on the circumstances of the painting during the tenancy. If the tenant unilaterally painted the walls without the landlord’s consent, it would clearly be a deductible expense to restore the walls to their original color. But if the tenant consulted with the landlord, who then consented to the panting, the landlord may have waived their right to recover the cost of restoring the walls, unless the landlord explicitly reserved their rights in writing.

The difference is that in the first case, the tenant is arguably “damaging” the property, whereas in the second case, the landlord is authorizing a modification or improvement to the property that the landlord could benefit from even after the tenancy concludes. However, if the unit would have been repainted regardless of the move-out condition, a landlord should not deduct the cost from the deposit, because it’s not a default in rent, repairing damage, or “restoring” the condition of the premises.

Because this is not always a clear line, landlords should anticipate that there may be disputes with their tenants. One way to avoid a dispute with a litigious or demanding tenant is to simply refund the deposit in full and spare yourself the trouble. But when a landlord chooses to take justifiable deductions, make sure that all actual expenses to date are disclosed to the tenant at their forwarding address within 21 days of vacancy. If the work associated with the deduction cannot reasonably be completed within 21 days, the landlord should make a good-faith estimate of the value of the work, then later issue a complete accounting and disposition within 14 days after the completion of the work.

Rigorously documenting all the deduction expenses may seem like a hassle, but it is good practice if the deductions are disputed. Landlords should keep move-in inspection reports, photographs, or videos to document the relative condition of the unit at the start and end of each tenancy, as well as any upgrades or improvements installed during longer-term tenancies. Tenants who object to security deposit deductions will have to take their case to small claims court, where such evidence will be useful. A landlord who can show good faith compliance with all the security deposit deduction procedures will be a big step closer to defending their claim.

This Q&A was originally featured in the SFAA Magazine December 2018 Issue.

© 2019 by Fried & Williams LLP. All Rights Reserved. The information contained in this article is general in nature. For advice on any particular matter, please consult with our attorneys because the facts of your situation may be unique and the law changes from time to time.