August 29th, 2022 at 4:11 pm
A. Whatever the buyer can successfully negotiate with the seller.
B. No more than the equivalent of 2 months of the market rent for the property.
C. It depends on whether the parties use a Seller License to Remain in Possession Addendum (SIP) or a Residential Lease After Sale (RLAS).
D. Zero.
Answer: Answer A is wrong. When a seller remains in possession of a home after close of escrow, the parties generally create a landlord-tenant relationship, regardless of whether rent is charged. Under the applicable landlord-tenant law, the maximum that a landlord can charge as a security deposit is the equivalent of 2 months’ rent for an unfurnished property.
Answer B is also wrong. The maximum security deposit is the equivalent of 2 months of the actual rent, not market rent.
Answer C is likely to be wrong. Although the SIP is intended for a seller’s possession of 29 days or less, it is still possible for a seller and buyer to use an SIP, instead of an RLAS. The SIP is presumably a “license to possess,” rather than a lease. The SIP allows the buyer to collect a “Delivery of Possession Fee,” whereas the RLAS allows for a security deposit.
However, buyers are well-advised to collect no more than 2 months’ rent either as a “Delivery of Possession Fee” under an SIP or security deposit under an RLAS. The reason is the law limiting security deposits to no more than 2 months’ rent generally applies to all residential tenancies regardless of length of stay, except for hotels, motels, and other transient occupancies subject to a transient occupancy tax. It is unlikely that a court or arbitrator will deem that the security deposit law does not apply to this situation just because the parties use an SIP, instead of an RLAS.
Answer D is the correct answer. If the monthly rent is zero, the maximum security deposit that a buyer should charge is 2 times the monthly rent or zero. Alternatively, the buyer can try to negotiate some sort of rental payment in order to get a security deposit.
-Thank You to Suzy Dahl (Santa Barbara Office) for suggesting this week’s legal tip!
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