THE HEAT IS ON
California Legislators Enter the Summer of 2002
with Interest on Security Deposits and 60-Day Termination Legislation

We are nearly half way through the year, and the California Legislature is not showing any signs of cooling down prior to its summer recess— especially as it relates to bills that will impact the rental housing industry.

As the Legislative Session opened in January, we were introduced to SB 1403, a bill that allows local government to adopt a law requiring rental property owners to give tenants a 60-day notice prior to terminating a tenancy. Despite hundreds of letters, that bill successfully moved off the Senate Floor and is awaiting a hearing in the Assembly.

On May 1, 2002, Assembly Member Carole Migden (D-San Francisco) amended her bill AB 2330 to make significant changes to landlord-tenant law. The amendments are sponsored by ACORN (the Association of Community Organizations for Reform Now), a group that considers itself the nation's largest community organization of low- and moderate-income families, with over 120,000 member families.

The bill does the following:
• Requires rental property owners to pay to tenants interest on security deposits when the deposits are held by the owner for more than 6 months.

• Adds anti-retaliatory protections for tenants who complain about their tenancy or the conditions of the property. If an owner raises the rent or decreases services to a tenant within 180 days after the tenant raises any concerns about his or her tenancy, the owner would be subject to a retaliatory claim.

• Prohibits the owner from collecting any nonrefundable fees at the beginning of the tenancy to reimburse the owner for costs to process a new tenant (i.e., application screening fees).

• Clarifies the law concerning security deposits as it relates to cleaning the unit. The owner would be allowed to deduct an amount from the security deposit for the cleaning of the premises upon termination of the tenancy necessary to return the unit to the same condition it was in at the inception of the tenancy.

• Defines ordinary wear and tear in the security deposit law to include routine painting, carpet replacement, or other repairs. The owner could not retain a portion of the security deposit for these purposes.

• Requires the owner to perform a walk-through at the end of the tenancy and mandates that the tenant be given the option to be present.

Given California's crucial need for housing, this may be the worst possible time for bills like SB 1403 and AB 2330. These bills are both harmful to the industry and, more importantly, are extremely detrimental to the very citizens they offer to help: the tenant community. It will certainly increase the expenses necessary for owners to adequately manage their rental housing business, and it may very well require owners to pass these expenses on to residents in the form of increased rents; this is certainly not a positive development for existing tenants.