Q: Our family has rented a beach house for a week on the Northern California coast. The rental contract says that if we violate any of the contract’s terms, such as the occupancy limit, rules for pets and smoking, and so on, we will "automatically forfeit" the security deposit in full, and we’ll be liable for any costs that exceed the deposit. Is this legal? –Jane and Brian P.
A: In a word, no. In California, as in most states, landlords may use security deposits only to cover past-due rent, to pay for repairs due to damage that exceeds regular wear and tear, and to cover the cost of replacing missing or destroyed personal property belonging to the landlord.
The deposit is not a pile of money that the tenant forfeits whenever the landlord believes that the tenant has disobeyed house rules or even lease clauses.
When tenants break lease rules and damage the property, or fail to pay the rent, landlords can use the deposit, within limits.
For example, if the tenant’s rule-breaking has in fact resulted in monetary damage — for example, he gives the landlord less than the whole rent, or the unauthorized dog digs up the tulip bed, requiring the landscaper to come back and replant — the landlord may dip into the deposit as necessary to cover the shortage or damage.
But he can’t simply take the entire deposit, without regard to his actual losses.
Let’s back up a bit to see why vacation rental landlords adopt the policy you’ve encountered. These rentals are short-term, and the rules that are apt to be broken do not involve the rent, which is usually paid in full before the tenants get the keys. Tenants are more likely to violate rules concerning unauthorized occupants, pets and smoking.
If the rental were long-term, the landlord could confront the tenant, deduct the actual damage from the deposit, and demand that the tenant replenish the deposit to cover any future violations. Or the landlord could serve a "cure or quit" notice, which makes the tenant reform his ways or move out.
But these two approaches won’t work nicely when the weekend is over, the landlord (or cleaning crew) discovers the dog hair, smell of smoke, and so on, and the tenant is long gone. The tenant obviously can’t be threatened with eviction by means of a cure-or-quit notice, but the deposit is just sitting there.
The landlord is legally entitled to deduct only what’s necessary to fix the damage, but for some landlords, it’s just too tempting to take it all. The tenant is not likely to make a return trip to fight over the deposit in a small claims court lawsuit. In effect, the prospect of losing so much money is undoubtedly a strong deterrent to breaking the rules.
Vacation landlords will protest loudly that the cost of dealing with smoke or even dog hair will almost always surpass the deposit amount anyway.
Maybe so, but that’s no reason to ignore the law and declare an illegal forfeiture. If the landlord really needs the entire deposit to fix the damage, she also needs to send a legally required explanatory letter, within the legal time frame, that explains why none of it is being returned.
And what if the landlord takes the whole deposit because the tenant had an additional occupant? Any landlord who claims that his damages from such a violation "just happen" to equal the entire deposit amount is playing fast and loose with the law.
Q: I recently bought a small apartment complex that had one tenant who was behind on his rent, whom the seller promised to get rid of. He served him with a termination notice, but the guy refused to leave and was still there when I took over. Now I have to evict him. Who should pay for the court costs and attorney fees? –Andy B.
A: The answer to your question depends on what, exactly, that promise consisted of; and whether it was an oral promise or something specified in the sales contract. Let’s start with the contract first.
In the sales contract, a promise to evict a nonpaying tenant would likely appear in either the "warranties" clause, or as a "contingency." A warranty is a representation by the seller that something is or is not so — for example, a seller might warrant that the property has no mold.
When a representation turns out to be false, the seller’s usual remedy is to sue for damages (like the cost of getting rid of the mold), rather than to try to undo the deal. Your seller might have represented that the property would be free of that nonpaying tenant.
A contingency, on the other hand, is a condition that, if not satisfied, destroys the deal. For instance, a sale might be contingent on a buyer obtaining financing at a particular rate.
In your situation, you might have made the sale contingent on the removal of that particular tenant. If the clause was clearly written to specify that the deal would not go through without his removal, in theory you’d have the right to back out of the sale.
So, if you obtained a warranty that the tenant would be gone, and he’s still there, what are your damages? It would seem to me that you could sue for the cost to bring an eviction lawsuit, because that’s what you have to do to obtain the benefit of the warranty.
In addition, if the tenant remains on the property post-sale and continues to fail to pay the rent, you might be able to collect that, too (another aspect of the warranty was the promise that your rent stream wouldn’t be lessened by this particular tenant).
On the other hand, if the promise was a contingency, you could undo the sale (probably not what you want). A well-drafted contingency clause would give you a choice of remedies, which would include suing for damages instead of destroying the sale.
Now, suppose the seller’s promise was merely oral? Here you’re in trouble. Most sales contracts specify that all promises, representations, agreements and so on are contained in the contract. The reason for this rule is to prevent conflicting or additional issues from entering from the sidelines, especially understandings reached in conversations.
Proving the substance of these agreements usually ends up with a "he said, she said" contest, and they’re very difficult to sort out. The contract warns you: Get everything you agreed to into this document, or forever hold your peace.
So unless your seller will admit that the promise was made and agree to stand by his word, you’ll be the one paying court costs and lawyers’ fees.