California Commercial landlord not returning deposit

[Kate R]

Jurisdiction

California

Hi,
Edited to add: I clicked that I was in CA, but the system glitched b/c it doesn't show.


Rented a office space where the lease is written that my agreement is the commercial equivalent of an agreement for accommodation in a hotel. The lease states they require 60 days notice of tenant to move out. I was required to pay last month's rent.

A year later, the lease expired. I did not renew (sign a new lease) but just continued to make monthly payments. When I asked about signing a new lease, the landlord said I was on a monthly lease.

On Aug. 12th, I gave written notice that I was moving my business out on Sept. 30th, which was 45 days notice. The landlord is refusing to give my "last month rent" deposit saying I have to pay to cover the month of October since I didn't give 60 day. So, I did pay my rent through Sept. 30th, but when I asked for the return of my deposit, they said "no".

From what I've been reading about commercial law, it seems that I am only required to give 30 days notice when I'm on a month to month lease. Also, I've read that commercial landlords cannot hold a deposit to pay for future rents, only for past unpaid rents. I was out of the office by Sept. 30th, so they are using it to cover a future rent.

The deposit amount is under $1K, not enough to warrant paying $400 for an hr of legal time, but definitely worth a small claims court filing. Another attorney told me it was illegal for the landlord to hold my deposit, but I'd like a second opinion before pursuing.

My question is, is it legal for the landlord to refuse returning my deposit of a "last month's rent." Thanks so much!

 

[army judge]

The law says one thing, the parties involved say another.
Your scenario illustrates my point.
If you find yourself in such a stalemate, you walk away, or you go to court.
Plaintiff pleads her case, defendant answers.
Ultimately a judge makes a ruling.
In your example, those are your legal options.
Let's stipulate that you prevail, receive your judgment.
It's far from over.
Now you bird dog your defendant/debtor to discover where his assets are secreted, to effect your judgment.

Going to court is easy.
Having your day in court isn't that difficult.
Collecting on your judgment, nigh on impossible.
Why do I say that?
Because you do the heavy lifting, the government won't assist you until you've discovered his secret stashes, locating those assets which you are permitted to levy against nder the law.

You do raise an interesting, tantalizing tidbit, however.
You claim you held a leasehold, much like a hotel, but it was for commercial space.

Leasing commercial property, or residential property, same same.

Renting a hotel room isn't a lease, although it may appear to be so.

Hotels and inns are special creatures under the law.

Did you mean you leased space in an office, referring to what is called "hoteling"?

That would still be a lease, unless it was truly a hotel like arrangement.

If its the former, not the latter, you might not have had a lease.

At any rate, the former might make your case a slam dunk, the latter requiring more effort to achieve the same result.

In the end, there's still that pesky endeavor to collect on your judgment.

Go for it if you fancy an interesting time making your former landlord squirm. Even if the the former landlord defaulted,there's still that rigorous activity ahead, collecting on your judgment.

 

[adjusterjack]

My question is, is it legal for the landlord to refuse returning my deposit of a "last month's rent."

Did you, perhaps, ignore critical provisions of your lease like you ignored the request for the "jurisdiction or location where the event occurred" when you started your message?

There's a reason why that's put there. Can you figure out why?

 

[Kate R]

Did you, perhaps, ignore critical provisions of your lease like you ignored the request for the "jurisdiction or location where the event occurred" when you started your message?

There's a reason why that's put there. Can you figure out why?

No reason to be an asshole, I did click the state of California, so there must be a bug in the system. I've edited my OP to reflect that.

 

[Kate R]

The law says one thing, the parties involved say another.
Your scenario illustrates my point.
If you find yourself in such a stalemate, you walk away, or you go to court.
Plaintiff pleads her case, defendant answers.
Ultimately a judge makes a ruling.
In your example, those are your legal options.
Let's stipulate that you prevail, receive your judgment.
It's far from over.
Now you bird dog your defendant/debtor to discover where his assets are secreted, to effect your judgment.

Going to court is easy.
Having your day in court isn't that difficult.
Collecting on your judgment, nigh on impossible.
Why do I say that?
Because you do the heavy lifting, the government won't assist you until you've discovered his secret stashes, locating those assets which you are permitted to levy against nder the law.

You do raise an interesting, tantalizing tidbit, however.
You claim you held a leasehold, much like a hotel, but it was for commercial space.

Leasing commercial property, or residential property, same same.

Renting a hotel room isn't a lease, although it may appear to be so.

Hotels and inns are special creatures under the law.

Did you mean you leased space in an office, referring to what is called "hoteling"?

That would still be a lease, unless it was truly a hotel like arrangement.

If its the former, not the latter, you might not have had a lease.

At any rate, the former might make your case a slam dunk, the latter requiring more effort to achieve the same result.

In the end, there's still that pesky endeavor to collect on your judgment.

Go for it if you fancy an interesting time making your former landlord squirm. Even if the the former landlord defaulted,there's still that rigorous activity ahead, collecting on your judgment.

My landlord isn't too bright and I think they are just bullying. I've been able to get one half of my deposit back and am working on negotiating the other to avoid small claims. They live in another state, so having to appear would be a real hassle. I'm depending on that they will find it easier to give me my other half. I'm also aware of the difficulty in collecting, so don't want to have to go that route myself.

 

[adjusterjack]

California has one landlord tenant statute that applies to both residential and commercial tenancies. If you'd like to study it, it starts at Section 1940 at:

CA Codes (civ:1940-1954.1)

The Security Deposit section is 1950.5 in that link.

Because your lease said that the "agreement is the commercial equivalent of an agreement for accommodation in a hotel" doesn't make it so. If you rented office space, it's office space and the law won't construe it as a hotel arrangement no matter what the lease says, unless you actually rented a room in a hotel or motel and used it as your office. If that's the case, there's a different set of laws.

As for the 60 day notice requirement, the law allows for 30 days notice for the most part but does not prohibit a lease from requiring longer notice.

Whether that 60 day notice requirement surveys the expiration of your lease depends entirely on the terms and conditions of that lease. For example: "Upon expiration of lease, the rental continues on a month to month basis under the same terms and conditions of the expiring lease." If your lease says something like that you could be stuck with the 60 day notice requirement and the landlord would be within his rights to keep the deposit for the last month rent. If your lease says something different you'll have to quote the terms word for word.

That you got back half the deposit leads me to conclude that the landlord just prorated it for the remaining two weeks of the notice requirement and you would not be entitled to the balance.

If you can bluff your way to getting the other half out of the landlord, more power to you, but I don't see him having any legal obligation to pay it to you.

 

[army judge]

My landlord isn't too bright and I think they are just bullying. I've been able to get one half of my deposit back and am working on negotiating the other to avoid small claims. They live in another state, so having to appear would be a real hassle. I'm depending on that they will find it easier to give me my other half. I'm also aware of the difficulty in collecting, so don't want to have to go that route myself.

A small claims judgment obtained by default against a person outside your state is even more useless than one obtained against a person inside your state.

That said, the guy living outside of CA can't even be served in another state, even if he were served, the CA small claims judge couldn't touch him in WY, for example.

You got a $1,000, I'd let it go.
The $1,000 won't break you, and it's not worth pursuing, because their's no easy way to get it.

 

[Kate R]

Thanks AdjusterJack, I've read over that section quite a bit already. The local attorney I spoke with the other day who specializes in commercial tenant law has told me that the landlord cannot legally enforce the 60 day notice- the state will only recognize a 30 day. It was his suggestion I reclaim the amount in Small Claims.

From what he explained, just because it is in the contract will not make it legally binding if the state doesn't recognize it. For example, the state of CA doesn't (or didn't a few years ago) recognize non-compete for service providers, yet spas and salons still put them in their contracts.

I did not receive $1K, I wrote earlier that the amount I paid as my "last month's rent" was under $1K. I've been paid around half the deposit, which is $461, although I haven't cashed the check yet. These amounts may not seem like much to some folks, but for me it is a lot of money.

The landlord actually lives in another country, but comes over four or five times a week to run the building which has receptionist and other services for all tenants. So serving them would not be difficult as they come over and spend the day before returning home.

I've decided that it's probably better in the long run to just keep the half but I will still attempt to negotiate and also threaten small claims. I'm aware of difficulties people have getting their funds, so that is something I'm considering as well.

 

[adjusterjack]

Thanks AdjusterJack, I've read over that section quite a bit already. The local attorney I spoke with the other day who specializes in commercial tenant law has told me that the landlord cannot legally enforce the 60 day notice- the state will only recognize a 30 day. It was his suggestion I reclaim the amount in Small Claims.

From what he explained, just because it is in the contract will not make it legally binding if the state doesn't recognize it.

Far be it for me (a humble layman) to disagree with an attorney but I suggest you ask him to cite you a specific authority for that belief, either a statute or a case decision.

The phrase "at least 30 days" appears several times in the statute, which implies that more than 30 days notice may be given, or even required, and I found nothing in the statute that prohibits an agreement between landlord and tenant for a 60 day notice.

For a commercial rental agreement, commercial tenants don't get protection that residential tenants get because commercial tenants (business people) are deemed to be sophisticated enough to read, understand, and accept the contracts that are presented to them. Thus, the courts are more likely to impose that duty on a commercial tenant.

So, were back to the question that you didn't answer. What does your lease say about continuing month to month on the same terms as expiring?

If it says nothing like I quoted earlier then, yes, the 60 day notice requirement is likely to fail and the 30 day notice is sufficient.

I'll stop now, until you answer the question. Quote the provision word for word.

 

[Kate R]

Here's the bit about notice:

"Bringing Your Agreement to an End

Either Client or Business Center may terminate this Agreement at the end date stated, or at the end of any extension or renewal period, by giving at least two (2) months written notice to the other.

8. When your Agreement Ends Upon your departure or, if you at your option, choose to relocate to a different office within the business center, a flat fee ($150.00 per office) will be assessed to cover the routine cost of repainting and redecorating the office to return it to its original condition in addition to general maintenance to the common areas of the business center in which you have had access. We reserve the right to charge additional reasonable fees for repairs needed above and beyond normal wear and tear. If you leave any of your own property in the business center, we may dispose of it in any way we choose without owing you any responsibility for it or any proceeds of sale."


Yes, I came here for a 2nd opinion b/c I don't want to assume the attorney I spoke with is correct and I would like to hear what other attorney's or judge's think of the matter.

 

[adjusterjack]

Anything about going month to month after expiration?

 

[Kate R]

There's nothing about it, however according to this manual from the CA Dept of Consumer Affairs http://www.dre.ca.gov/files/pdf/refbook/ref09.pdf on pg. 131

"after expiration of the lease term and the landlord accepts rental payments, the parties are presumed to have renewed the lease on the same terms and conditions on a month-to-month basis if rent is payable monthly, and in no event longer than one year."

I've found that sentiment in several documents on commercial tenant law.

 

[adjusterjack]

It's actually on Page 132.

I don't like that handbook because it doesn't cite authorities for its conclusions.

If that quotation were true you would be stuck with the 60 day notice requirement because your lease was "presumed" to continue on the "same terms and conditions."

The handbook goes on to contradict itself two paragraphs later by saying:

"To be enforceable, lease provisions for the extension or renewal of a lease must be reasonably specific and contain all of the material terms."

That statement conforms to contract law a lot more than the previous statement about the presumption.

I know I am hung up on citing authorities. If you go to court on this and say something is so, the judge isn't going to know the thousands of citations that could apply to all the matters that come before him, nor is he going to say "just a minute while I look that up." It's up to the parties to provide the authorities for the points they are making.

As a Plaintiff you have to prove your case. The Defendant need say nothing. If you can't provide the authorities to back up your assertions you don't win.

 

[Kate R]

Funny thing is that's the clip the landlord sent me to show that my lease continued on the same terms. And over a year ago, when I mentioned I hadn't signed a new lease, they said I was on monthly terms, so I didn't need to worry about signing a new one.

So, I have this: When a rent is paid monthly, it is considered a "periodic rent" "Notice to Terminate a Periodic Lease – Month-to-Month: Landlord is required to give 30 days notice. Tenant is required to give 30 days notice. (Civ. Code §§ 1946)"

And then this: "Commercial: The 2005 California case, 250 L.L.C. v. Photopoint Corp., held that Civil Code Section 1950.7 doesnot allow a commercial lessor to retain the security deposit to cover its damages for future rent owedunder the lease. The court interpreted Section 1950.7 to provide that a security deposit may beapplied only against unpaid rent that has accrued as of the date called for in the statute for the returnof the deposit. For example, a lessor with abandoned premises, as was the case in 250 L.L.C., may either deem thelease terminated and seek damages under Section 1951.2 or continue to perform under the leaseand seek rent as it becomes due under Section 1951.4. By terminating the lease, the landlord nolonger has a continuing right to receive rent under the lease, but rather, has a damage claim for rentlost through the tenant's abandonment. In this instance, the landlord would have to return thesecurity deposit on the date that it terminated the lease, and could consequently apply the security deposit only toward unpaid rent that had accrued as of that date."


It seems to me that if my lease is considered periodic and since CA commercial contract law does not allow a landlord to hold a security deposit for future unpaid rent- then I should receive my full deposit because I paid up until I left and also gave 45 days notice. So essentially, by that logic, the landlord is holding future unpaid rent.

This is the hitch that I'm hoping someone with experience in CA commercial law can answer. Well, they will answer it, but for a fee of $400 which I cannot afford.

 

[adjusterjack]

Ah, good, a case citation to analyze. Here's a link to the full decision:

FindLaw's California Court of Appeal case and opinions.

However, I don't think is applies to your situation because the landlord is not attempting to keep the deposit against an estimated future rent loss. He's attempting to keep it to cover past rent loss damages. You've already surrendered the premises and he has accepted the premises. There is no longer any issue about future rent, so the decision about future rent in 250 LLC doesn't apply.

If the 60 day notice requirement were to be upheld you would owe 15 days of past rent damages because your breach occurred on October 1 when you failed to pay rent for the remaining notice period. The landlord would be entitled to keep the half month rent that remains.

If the 60 day notice period doesn't apply you would be entitled to the rest of the deposit back.

So far I don't have any authority to back up the handbook's presumption that the lease extends under the same terms and conditions if the lease doesn't expressly say so.

A search for that phrase for California did not bring up any case decision (which is not to say there aren't any, just that none came up using that wording) but a national search brought up a 1989 South Carolina decision that said:

"Contract for extension or renewal of lease must specify conditions of renewal with certainty."

PLAYER v. CHANDLER | Leagle.com

A similar case in Mississippi says:

"This Court has long recognized that an agreement must be definite and certain in order to be enforceable."

Intrepid, Inc. v. Bennett

Those decisions are not precedential to California and California has no obligation to follow them but a California court could be convinced that the decisions are persuasive.

 

[Kate R]

Yea, I haven't been able to find anything that I feel like would allow me to present a solid case against the landlord.

This person wasn't even going to return the 1/2 deposit they did send until I threatened to take it to small claims.

Unless I can find or be directed to something that shows I would have a solid case, I'm not sure it would be worth the extra $460. Even though that is a lot of money for me, if I take it to small claims I wouldn't be able to cash the first check and would need to submit it as evidence.

In which case, if the landlord lost but still failed to pay, I'd be out even more.

I did contact a few other attorney's in the state and will see what they say.

 

[Kate R]

I've found what is considered an "evergreen clause" and it looks like it is the in the landlords right to claim a 60 day notice. Here's the first mention of it I've found: http://marell-lawfirm.com/the-pesky-auto-renewal-clause/

I'm searching further, but it may be this evergreen clause it legal in CA commercial contracts.

 

[adjusterjack]

That article applies to the sale of goods and services (reference made to "suppliers"). Might not apply to landlord-tenant arrangements. And, again, no citations of authorities. I left a comment.

 

[Kate R]

That's been my findings as well. So far all I've found is that CA requires the evergreen clause to be written in an obvious manner- such as larger font than surrounding wording or highlighted and the clause can be invalid if not written in such a way. However, this only seems to be for service providers and there are no mentions of the legality in a commercial contract.

Your comment isn't up yet, but I'll check back later for it.