Q: We manage several rental properties and would like to know the language we need to use when we refund the balance of the security deposit to the tenants as a final payment of the refund. Your guidance in this matter will be appreciated.

Landlord’s attorney Ted Smith replies: After proper deductions, California landlords are required to return tenants’ security deposits — or portion thereof — within 21 days after the tenant vacates the rental. A written accounting stating the amount of — and the basis for — all deductions needs to be given.

As a landlord’s attorney, I recommend that you not place restrictive endorsement language on your security deposit refund checks. The law allows the tenant to take issue with your deductions. You and your ex-tenant may have a dispute regarding the condition of the premises and the amount deducted from the security deposit. An endorsement on the check, which waives the tenant’s right to object, goes against California law on this point.

In a given case, there may be something further to negotiate. The parties are free to resolve their differences regarding the deposit during subsequent negotiations. However, this would be on a case-by-case basis after the accounting is given.

Tenant’s attorney Steven R. Kellman replies: I agree with Ted that you should not put any restrictive language on a deposit-refund check (i.e. writing “paid in full” on the back).

The tenant should not be forced to agree to any waiver or release demands of the landlord regarding their refund.

The security deposit refund is not an offer to pay the landlord’s money to the tenant to buy the tenant’s rights or resolve any dispute. It is the tenant’s money being refunded.

I feel that putting “paid in full” type language on an accounting is not binding on a tenant who cashes a deposit-refund check. I also feel that putting this language on the check may actually be wrongful conduct.

You, as a landlord, have a specific legal duty to refund the deposit to the tenant, less lawful deductions. You do not have a right to refund a lesser amount than is due and try to force a tenant to agree to it and waive their right to a full refund with special language. If there is a dispute, you can resolve it by negotiation with the tenant.

If the tenant remains dissatisfied, he or she may initiate a small claims case. If so, do not be intimidated or angry. Simply look at this as a cost-effective way to resolve the dispute and be prepared for the hearing.

Be sure to document and justify your deductions to avoid any claims that you acted in bad faith, because that carries a double-the-deposit penalty.

Q: I was renting a condo from a woman who lives in Arizona. Each month I mailed the rent check to her home address. She decided to sell the property recently, so I moved out of the condo. It has been more than two months and I still have not received my refund check or an accounting indicating any reason why she was not giving it back. The landlord has since sold the property and she is still living in Arizona. What is the best way to get my rent deposit back?

Property Manager Robert Griswold replies: I suggest you immediately send a demand letter to the owner in Arizona and require a response within 10 business days. If you do not receive a satisfactory reply, you should sue the owner in small claims court.

The small claims court can either serve her by mail or you may have to arrange with a local process server that has connections in Arizona to get the matter served. That is probably your biggest hurdle, but should not be a problem because you have her home address.

The owner would need to appear in person or send a representative. Of course, you may find that the owner is a no-show and then you have a judgment that is difficult to collect. In that case, I would recommend you turn the matter over to an aggressive national collection agency and see what they can do.

Send questions to Rental Roundtable, 5703 Oberlin Drive, Suite 300 San Diego, CA 92121-1743, or by e-mail to rgriswold@retodayradio.com

Source:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/01/28/REGQQNN2OF1.DTL