Frederickson & Pick Blog

Landlord’s Obligations with Regard to a Commercial Property Security Deposit

  • Roger Frederickson
  • January 13, 2016

Cal. Civ. Code § 1950.7 governs security deposits for commercial leases and the handling of the deposit after the termination of tenancy.

Commercial landlords routinely use security deposits as a reserve account, available to help them offset the cost of repairing damages caused by a tenant, to satisfy unpaid rent, or to allow them to recover damages following a tenant’s unauthorized lease termination.

California Civil Code Section 1950.7 establishes that a commercial landlord may use a security deposit to remedy monetary defaults, to repair damages to the property caused by a tenant, and to clean the property following termination of a lease. A landlord must refund any unused balance of a security deposit anywhere from fourteen to thirty days after the the landlord recovers possession of the premises, and must provide the tenant with an accounting of the amounts applied from the security deposit. And, if requested by the tenant, must provide receipts for those expenditures.

Unless the lease includes an express waiver of the provisions of Civil Code section 1950.7, a landlord cannot apply a security deposit to offset future rent damages. The California Court of Appeal in (2005) recently held that unless a lease.

A misapplication of a security deposit, or the failure to timely and properly account for its use, or a failure to return the security the unused portion of deposit, could expose the landlord to a claim for the actual damages suffered by the tenant, a $200 fine, and if provided for in the lease agreement, the recovery of attorney’s fees and costs.

If you are a Commercial Landlord on the central coast and have questions or concerns regarding your commercial lease, contact Frederickson Law for a free consultation and case evaluation.

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