Dive Brief:
- California Attorney General Rob Bonta announced a settlement with Costa Mesa, California-based apartment manager Arnel Management Co. for over $1 million, related to alleged illegal withholding of security deposits, according to the AG’s office.
- The complaint alleges that the company, which operates 19 apartment buildings across Orange County and Los Angeles County in California, deducted pre-set cleaning fees from renters’ security deposits regardless of the condition of units. The only way that tenants could allegedly avoid these fees was to hire a professional cleaning service.
- In addition to the fine, Arnel will also be subject to “more stringent injunctive terms” to deter the company from future violations, according to Bonta’s office.
Dive Insight:
Under California state law, cleaning fees may only be taken from the security deposit if the unit is left in worse condition, aside from ordinary wear and tear, than it was when the tenant moved in. Tenants may also ask their landlords to inspect their units to identify issues before move-out.
This is the second time that the California Attorney General’s office has brought a complaint against Arnel related to its alleged security deposit practices. In 2001, Arnel was ordered to pay a settlement of $1.5 million ($2.6 million adjusted for inflation), including $1.1 million for refunds to tenants.
Complaints alleged in the 2001 case included charges for ordinary wear and tear; unreasonable clean-up and repair costs; and illegal withholding of security deposits regardless of the apartment’s condition. Under the terms of the settlement, Arnel was required to explain its security deposit practices in clear terms to current tenants.
The 2024 settlement is intended to “replace and refine” the terms agreed upon in 2001, according to the AG. Arnel is now prohibited from requiring tenants to repair any damages from ordinary wear and tear, imposing any pre-set fees to be deducted from security deposits or providing compensation to employees based on deductions from deposits. The company must also respond to tenant complaints in writing and provide pictures to support security deposit deductions.
Every six months for a period of five years, Arnel must also provide a report on its compliance with the settlement to the Attorney General. Arnel did not respond to a request for comment from Multifamily Dive.
“For many renters, especially those from lower-income backgrounds, affording a security deposit entails a great deal of sacrifice,” Bonta said in a press release. “We are holding Arnel accountable because, in some cases, the company failed to return to tenants the entire security deposit that they were legally entitled to and worked hard to save up for.”
