This is the first in a series of articles/posts relating to a commercial landlord's obligations to return security deposits of tenants in various situations. Some of the situations will be discussed in later articles and may include:
- The landlord's right to hold excess security deposits to pay for future rental obligations after default and termination of the lease;
- Can tenant waive statutory protections to security deposit;
- The tenant's rights to have the security deposit returned after the landlord has filed bankruptcy; and
- Supplemental remedies available to both the landlord and tenant.
A commercial landlord's obligations regarding security deposits is generally governed by
California Civil Code Section 1950.7(c), which provides in pertinent part that the landlord may claim the amount of the deposit that is reasonably necessary to remedy the tenant defaults. California Civil Code Section 1950.7(c)(1), also provides that if the landlord’s claim is only for defaults in the payment of rent, then the landlord may retain the whole of the security deposit, so long as the security deposit held by the landlord is “….no more than one month's rent plus a deposit amount clearly described as the payment of the last month's rent."
At face value, this language would appear clear that any amount greater than two months rent, held by the landlord, must be returned to the tenant, even if the amount of default was greater than two months rent. So, if the landlord is holding 6 months rent as a security deposit and the tenant is 4 months in arrears, does the above language still mean that the landlord has to return 4 months rent? In true lawyer like fashion, my answer is "it depends." My answer will depend upon the language of the lease and other alternative remedies that the landlord may have available in its toolbox. More on that in my later posts.
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