NEW LAWS AFFECT RESIDENTIAL RENTAL
PROPERTY
HAROLD S. SMALL, J.D., CPA, and AEP
The Legislature was busy in 2002 enacting many changes to
the law, including two significant bills that were signed into law by the
Governor that will have a substantial impact on owners of residential rental
property. Effective January 1, 2003,
rental property owners are required to perform a walk-through of real property
with residents no earlier than two weeks prior to the termination of the
tenancy. The intent of the legislation
appears to be the desire of the legislature to give tenants the opportunity to
cure defects that otherwise will result in a reduction of their security
deposit in an effort to permit the return of more security funds to tenants.
Owners of real property are required to
give written notice to residents within a reasonable time after notification of
the intention of either party to terminate the tenancy, or before the end of a
lease term, of (1) the resident’s option to request an initial inspection and
(2) the resident’s right to be present at the
inspection.
If a resident requests an initial
inspection, the owner (or owner’s agent) is required to make an initial
inspection of the leased premises at a reasonable time, but no sooner than two
(2) weeks before the end of the tenancy or the end of the lease. This inspection is in addition to any other
inspection the owner may make after the premises are vacated by the resident. No further action is needed on the part of
the owner if a resident does not request an initial inspection. However, if an inspection is requested, the
owner (or his agent) and the residents shall attempt to schedule the inspection
at a mutually acceptable time and date.
When a mutually agreed upon time and date have been reached, the owner
is required to give at least 48 hours prior written notice to the resident of
the time and date of the inspection.
However, if the parties are unable to reach an agreement for the time
and date of the inspection, the owner must give at least 48 hours written
notice to the resident of the date and time when the inspection will
occur. There is no requirement that the
resident be present during the inspection.
Also, the owner and resident may agree to waive the 48 hour written
notice by both signing a waiver. The
owner shall proceed with the inspection regardless of whether the resident is
present or not, unless the resident has withdrawn his or her request for the
inspection.
Once the inspection has been completed, the
owner shall give the resident an itemized statement specifying the cleaning and
repairs that are proposed to be the basis of any legally permissible
deduction/charge against the security deposit.
The itemized statement is required to include the actual text of certain
sections of the California Security Deposit Law. When the resident is present for the
inspection, the statement must be given to the resident. If the resident is not present, then the
owner is required to leave the statement inside the premises. The resident then has the opportunity
following the initial inspection through the termination of the tenancy to
remedy in a manner consistent with the rental agreement/lease the identified
deficiencies in order to avoid any deductions or charge against the security
deposit. If the resident does not
correct the deficiencies, the owner has the right to use the security deposit
for deductions that were itemized in the statement that have not been corrected
by the resident, so long as the deductions are allowed by law.
The owner is allowed (pursuant to agreement
and/or California statute) to use the security deposit for the payment of rent
in the event of a default by the resident, the repair of damages to the rented
residential property caused by the resident or the resident’s guests, exclusive
of ordinary wear and tear, cleaning of the residential unit in order to bring
it to the same level of cleanliness as it was at the inception of the tenancy,
the failure of the resident to restore, replace, or return personal property or
appurtenances, damage to the rental property that occurred between the
completion of the initial inspection and termination of the tenancy, and damage
to the rental unit that was not identified by the owner during the initial
inspection due to resident’s possessions being present within the unit.
The bad faith retention of security funds
by an owner, or any portion thereof, may subject the owner to damages allowed
by statute equal to up to twice the amount of the security deposit, in addition
to the actual damages suffered by the resident.
Other adverse consequences may result for owners that fail to act in
accordance with the new statutory requirements.
Rental property owners should consult with
counsel regarding notices that must now be given and the actions that must be
taken to minimize exposure to tenants for failure to properly inspect and
refund security deposits.
THE FOREGOING
CONCEPTS AND IDEAS ARE GENERAL STATEMENTS AND ARE INTENDED TO PROVIDE CONCEPTS
FOR CONSIDERATION IN BUSINESS AND TAX PLANNING.
CAREFUL CONSIDERATION NEEDS TO BE GIVEN BY THE USER REGARDING THE USE
AND APPLICATION OF THE CONCEPTS. YOUR LEGAL AND TAX COUNSEL SHOULD BE CONSULTED BEFORE THE
IMPLEMENTATION OF ANY OF THE IDEAS INDICATED HEREIN. SHOULD YOU HAVE QUESTIONS REGARDING THIS
MATTER, HAROLD S. SMALL, ESQ., CAN BE REACHED AT
Copyright Harold S. Small 2007. All rights reserved.