Our Los Angeles Commercial Lease Attorneys were recently asked to analyze and determine whether portions of a commercial lease security deposit could be applied to future rent damages in the event of a breach of lease or eviction wherein the commercial tenancy is terminated prior to the running of the lease. California Civil Code § 1950.7 governs the disposition of commercial lease security deposits.
Section 1950.7(c) states that “The landlord may claim of the payment or deposit only those amounts as are reasonably necessary to remedy tenant defaults in the payment of rent, to repair damages to the premises caused by the tenant, or to clean the premises upon termination of the tenancy, if the payment or deposit is made for any or all of those specific purposes.” Sections 1950.7(c)(1)-(2) further limit the disposition of the security deposit in the event of a breach or default to one month’s rent plus an amount clearly described by the security deposit provision in the commercial lease as payment of the last month’s rent.
The security deposit, as governed by Section 1950.7, cannot be applied to future rent damages as a matter of California law. See 250 L.L.C. v. Photopoint Corp. (USA), (2005) 131 Cal. App. 4th 703, 728. The Photopoint Court held that application by the Landlord of the security deposit to future rent damages would enable a landlord to profit from its violation of Section 1950.7. Thus, California courts will not allow a commercial landlord to use a security deposit toward future rent damages.
If you have questions regarding these commercial lease issues, don’t hesitate to contact our Commercial Lease Attorneys for a free consultation. 888-693-5556.