Residential Security Deposits: When can a landlord deduct from a security deposit?

In 2016, my tenant called to report water seeping into the bedroom. I arrived to find the carpet sopping with water. The water spilled from the edge of the room closest to the bathroom. So, I entered the bathroom to investigate. In this post, we will review whether or not a landlord may deduct repair costs from a security deposit, when he discovers damage that goes beyond normal wear and tear.

On that day, I discovered the source of the problem. The bathtub was leaking. The tenant described the source of the leak as a “crack” in the base of the tub. What I found instead of a crack was a hole that measured more than 4 inches at its longest diameter. This was not a mere crack, which might be formed by the repeated use of a tub over time. This was an intentional infliction of damage, or at the very least, a willful neglect of a problem that had been ongoing for a very long time.

Plumbers had to replace the tub. They could not find one that matched the width of the current tub, so the next nearest size necessitated that they relocate the sewer drain. Because the bathroom is on slab (concrete) foundation, they had to pulverize and remove sections of concrete. This was not a small task, and by the end of the job, I had spent $4,000 on the plumbers alone. This did not include any money spent on repainting or other incidental costs. Could I deduct this from the security deposit even though the lease had not yet ended? Or, would I be required to wait until the end of the lease and eat the cost of any maintenance or repairs performed during the middle portions?

Do I have a statutory obligation to wait?

California law has a statute that requires all landlords to wait until the end of the lease to assess damage against the security deposit.1Civ. Code, § 1950.7 The lease can expressly waive this statutory duty.2Civ. Code, § 1950.7, notes However, this statute is specific to commercial leases only.3Civ. Code, § 1950.7

California also has a similar statute for residential leases, but none of the statute’s paragraphs require waiting.4Civ. Code, § 1950.5. Section 1950.5 of the Civil Code references money used to repair damage “exclusive ordinary wear and tear.”5Civ. Code, § 1950.5, subd. (b)(2) But, definitions are not the rules set forth by the statute.

Under the list of rules that follow the definition of “security deposit” in Section 1950.5, subdivision (b), none state a time restriction on when deductions may be made.6Civ. Code, § 1950.5 However, the statute implies that deductions may not be made during tenancy.7Civ. Code, § 1950.5, subds. (e) & (f)

Under these security deposit rules, the residential tenant has the right to request an inspection of the property prior to moving out.8Civ. Code, § 1950.5, subd. (f)(1) The express purpose of this right is to give the tenant an opportunity to avoid unnecessary or surprising deductions.9Civ. Code, § 1950.5, subd. (f)(1) The statute then states that giving the tenant the right to avoid unnecessary charges does not prevent the landlord from deducting fees when the landlord makes makes repairs “not cured by the tenant” after the tenant has received the itemized repair list from the landlord.10Civ. Code, § 1950.5, subd. (f)(4)

Although Section 1950.5 does not require a landlord to wait to make deductions. However, the underlying intent behind the initial inspection described in subdivision (f)(4) suggests that the legislature intended the landlord to wait until the tenancy has ended to make deductions.

What are my options under the contract?

I have always written my own contracts. I never advise such foolishness with my friends. To my friends, I always say: find a form contract that has a good history and is well tested. But, I am foolish, so I write my own: this is a habit I am starting to deviate from.

One nice thing about writing your own agreements is that you can control the language without making the document overly complex. For me to write the same contract I have now using a template, I would need to start with the template and then add an addendum that modifies all the terms of the template that I find disagreeable. This can be both confusing and unweildy.

The commercial security deposit statute allows the timeline to waived by contract.11Civ. Code, § 1950.7 It would be a mistake to think that the same waiver would apply to residential contracts. First, commercial tenants are thought to be more savvy and capable of negotiating contracts. Second, no note on the residential security deposit statute (Civil Code section 1950.5) even speaks to the potential of modifications or waivers by contract.

Under the express terms of my agreement with the tenant, I may use the security deposit to repair any damage in excess of normal wear and tear. No mention of time is made. There is no express provision limiting this to damage at the end of the lease. However, there is also no language addressing Civil Code section 1950.5 or expressly granting special permissions outside the requirements of this contract.

It would appear that for policy reasons, that a court would likely rule against me if I were to deduct any portion of the $4,000 repair bill from the security deposit. This would be especially true if the deduction were a surprise to the tenant.

What could I do?

There is a clash of ideals here. On the one hand, there is a public policy reason to protect tenants from unscrupulous landlords. The provisions of section 1950.5 attempt to protect tenants from those kinds of surprises. But, this puts the landlord in an awkward situation.

Tenants often do not have the funds to cover major repairs, which is why landlords require security deposits. Asking the tenant to pay for the damage mid-lease is unlikely to result in satisfaction, and the landlord has an affirmative duty to provide habitable housing. Thus, the repair <em>must</em> be made.

The landlord could terminate the contract to take advantage of the security deposit. But, this has two problems: (1) it could be considered retaliatory, which would be prohibited; and (2) it would discourage tenants from coming forward when major repairs are needed. Neither of these problems suggests terminating the agreement as a good choice.

Nothing that I have found prevents the landlord from modifying the contract. Given the chance to do it again, I would likely have presented the bill to the tenant and negotiated a higher rent to recuperate the costs sunk into the tenant’s damage.

The tenant would still be free to vacate, but if the tenant chooses to stay, the court will likely give weight to the fact that the tenant stayed under a conscious choice of his or her options. The underlying purpose of the alteration is also likely to survive the California rent cap statutes, because the landlord is raising the rent specifically to cover increased and unexpected costs.

What did I do?

Hindsight is always 20/20. I thought that I could keep the tenant; it is always better to keep a tenant rather than to face a vacancy, especially after large expenses. To keep things amenable, I did not present the tenant a bill. I did not attempt to modify the agreement. I put it off thinking that I could simply keep the security deposit at the end of the lease, which would be a measly drop in the bucket compared to my incurred costs.

In Summary

The Civil Code does not expressly prohibit deducting repairs as they occur in residential leases. However, when you read between the lines, you begin to see an underlying policy that suggests that waiting to the end of the lease is what the legislature intended for you to do. Naturally, if you have already made the repairs mid-contract, there will be nothing uncured at the end of the lease for which to bill, so the landlord ends up swallowing the costs of the repair.

If you find yourself in this kind of situation, don’t be afraid to sit down with the tenant and renegotiate the agreement. Avoid any action that appears retaliatory. Present invoices and facts showing that this is an expense that is the duty of the tenant to incur and that you are cognizant that the tenant may not have the funds. Work toward a mutually beneficial agreement and put it down on paper. This is likely the best solution to the above problem.

Naturally, if you should find yourself in this situation, you must consult your lawyer. Do not take any of the information above as advice. These are merely the ramblings and thoughts of a law student who lacks detailed information about your specific situation.