The stakes are high when it comes to security deposits in California. An estimated $5 billion of tenant security deposits are held by California landlords. With an average tenancy statewide of less than three years, this means that in excess of $1 billion of deposit money annually is either returned to or withheld from California tenants. Most California tenants are lower-income and their security deposits represent a significant financial asset for them.
Responding to widespread complaints about unfair withholding of security deposits, Tenants Together conducted two studies.i The first examined the experience of Tenants Together members with respect to their security deposits. The second examined court records in an effort to determine the outcome of security deposit cases and identify potential causes of improper withholding.
The survey of Tenants Together members found:
- 60% reported that they had experienced unfair withholding of some or all of their deposit;
- 53% reported that the last time they moved, they did not receive any of their deposit funds within 21 days of vacating;
- 36% reported that their entire deposit was withheld the last time they moved.
The three-courthouse study of small claims actions found:
- Tenants prevailed in over 70% of the cases that went to judgment;
- In only 3.5% of the security deposit cases filed by tenants was a landlord assessed a penalty by the court.
These studies evidence widespread improper security deposit withholding. Only a small minority of tenants sue to recover their deposit, even when they feel they have been deprived of deposit funds unfairly. When cases are litigated, the tenants usually prevail in court, but in only a small portion of cases are any damages beyond the amount of the deposit assessed, creating little deterrence for landlords who improperly withhold funds.
This report recommends two reforms to ensure that tenants are not unfairly deprived their deposits. First, tenant deposits should be kept in accounts that are separate from the landlord’s personal funds. Second, meaningful, mandatory penalties should be imposed for improper retention of security deposit funds by landlords. Together these reforms will help ensure that deposit funds are preserved until the end of the tenancy and are returned as required by law.