DO NOT PAY ANY INTEREST ON SECURITY DEPOSITS!

The Santa Monica Rent Board made it official— they are not requiring owners to pay interest on tenant security deposits in October 2002. We have been paying tenants interest for the past three years, and each owner probably averages $25-$30 in interest payments to each tenant. I base this calculation on my own personal situation. You may not think it adds up to a great deal of money, but an $800 security deposit at 3% interest adds up to $24 in mandatory interest each year. If you charge rent of $700, I would think you would collect at least $800 in security deposit. The law permits you to charge three times the monthly rent as the total collected to move in.

I know that I did not get 3% interest in my bank account. It was more like .5% or .75%.

However, when you have 3,200 owners paying an average of $25 annually to 28,000 tenants, that adds up to some real money. It probably is more than $750,000 each year, and we have done it for three years. That is how I derive the damages totaling at least $2 million that is owed to us by the City of Santa Monica. As Senator Dirksen, once known for talking about government spending, said, "You spend a billion here and a billion there… pretty soon you are talking about real money."

We have ACTION and Rosario Perry to thank for this very, very fine win in the Court of Appeal. As you recall, the California Supreme Court refused to hear the case or to decertify this decision. Why? Because the Appellate Court said, "A SMALL TAKING IS STILL A TAKING."

As you might imagine, the Rent Board and the City Council are furious with this decision. The last thing they want to do is to pay anything to the owners. We still have to go back to court. The money judgment amount has not yet been decided. Within a few months we should be in court.

Other Salient Facts:

1) They don't have the funds (last time I checked, the city had a $8 million deficit).
2) They hate owners so much; it would just kill them to write owners a check for any amount, big or small.
3) The City Fathers are not used to giving out money to owners since they usually take money from owners.

So what do they do?

1) They plan a strategy designed to convince the judge that the damages are overstated and possibly not warranted. I don't think that will work because the Appeal Court has ruled that we have been overcharged.
2) Hire an outside attorney. They did. His name is David Petit. His wife works for the Rent Board as a hearing officer. I see by the Rent Board's budget that they have set aside $120,000 in the budget for outside attorneys. So you can bet that David Petit is probably charging the Rent Board $100,000 for his services. (As a landlord, I have to do all this busy work for a living. What am I being paid for all the time and effort I expended? Every owner had to do the same thing in order to comply with the Rent Board's edict regarding interest on deposits)
3) Deposition the plaintiffs and try to get them to say things that will hurt this case.

Well, that brings us to my deposition. Yes, I was called upon by David Petit to come to a deposition and he gave me a laundry list of items to bring. Remember I am a plaintiff along with ACTION. It took me between 10-12 hours to gather up all the required data, but I did it. I am certain it surprised them.

Here are some of the documents I was to produce for the deposition:

1) All articles I have written for WAM, including drafts. (I think they felt I was going to write a book and further embarrass them.)
2) All 1099's given to my tenants from 1999, 2000 and 2001. (I'm sure they felt that I would not produce them, because they thought I never prepared any— guess again)
3) All documents showing interest paid to tenants (That means checks, etc., for three years)
4) All my accounts where I kept the deposits. (That means three years worth of bank statements.)
5) All the interest and the rate I earned in my accounts during the past three years.
6) All leases with my tenants since 1999.
7) All notices of rent increases given to any tenant from January 1999.
8) All documents indicating the MAR's
9) All documents relating to the move-in and move-out dates of tenants.

I had about three business days to prepare these documents before the deposition. Think you would have been able to handle it?

The one point I tried to make was that I found the entire procedure of the calculation of the interest and filling out the interest forms and writing the checks to be very tedious. It was an exercise in busy work. It made no sense. All this in addition to paying interest to tenants on security deposits in excess of the amount I was getting from the bank.

The deposition went very well. I did not get excited (I usually do react negatively when I am fighting evil). I did not make smart-ass remarks (I can do that, also, when dealing with the enemy). When it was over, we took a photo together, and that is on the cover of WAM this month. David Petit said he would like to show it to his mother.

The most interesting fact of all was: Do you recall when I have mentioned in this column how all the City Fathers read WAM each and every month? When David Petit pulled out all the columns he could get off the Internet of mine and Rosario Perry, I really felt flattered. I was questioned about various statements I had made in the past taken directly from WAM. I answered them honestly and without hesitation. I even offered to put him on the mailing list if he wanted to be included. Truly, I think we came out very well.

YES, ACTION ACCOMPLISHED A GREAT FEAT! BE PROUD. BECOME A DUES-PAYING MEMBER OF ACTION. HELP US FIGHT THE EVILDOERS.