California Attorney General Rob Bonta Announces Settlement with Arnel Management Company over Illegal Withholding of Security Deposits

SACRAMENTO – California Attorney General Rob Bonta today announced a settlement resolving allegations that Arnel Management Company (Arnel) illegally withheld security deposits from tenants in Southern California. Specifically, Arnel — a corporate landlord that operates 19 apartment complexes in Orange and Los Angeles counties — is alleged to have automatically deducted pre-set cleaning charges from security deposits in violation of California law and an existing injunction. Under the terms of today’s settlement, Arnel will pay over $1 million and be subject to more stringent injunctive terms to deter future misconduct.

“California tenants have rights, and my office is committed to protecting those rights,” said Attorney General Bonta. “For many renters, especially those from lower income backgrounds, affording a security deposit entails a great deal of sacrifice. 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.”

In 2001, the California Attorney General’s Office reached a separate settlement with Arnel related to its security deposit withholding practices. Today’s settlement is the result of a new investigation into Arnel and will replace and refine the terms of the 2001 judgment. The new investigation revealed that in some buildings Arnel was deducting pre-set cleaning fees from tenants’ security deposits, irrespective of the condition of the unit. Tenants could only avoid the pre-set cleaning fees by having their unit professionally cleaned when they moved out. 

Under the settlement, Arnel will, among other things:  

• Pay $500,000 in additional civil penalties.
• Pay $650,000 that will go to tenant rights-related legal aid organizations in Orange and Los Angeles counties.
• Be prohibited from requiring a tenant to repair any damages or defective conditions that preexisted the tenancy or that resulted from ordinary wear and tear.
• Be prohibited from imposing any pre-set or predetermined deductions, or treating any portion of a security deposit as nonrefundable, including, without limitation, by charging a standard cleaning fee, a standard carpet cleaning fee, a standard painting fee, or any other standard fees or deductions not tied to the condition of the unit.
• Be required to provide clear notice to tenants of their rights.
• Be required to respond to tenant complaints in writing, and support security deposit deductions with pictures. 

Under state law, withholding cleaning fees from a security deposit is allowed only when the unit is not left in the same level of cleanliness as when the tenant moved in. Tenants may clean their unit themselves, and landlords may not deduct for repairing ordinary wear and tear. In addition, tenants may ask their landlord to inspect their unit before they move out and identify any issues, so that the tenant has the chance to fix or clean them in order to avoid security-deposit deductions. Earlier this year, Attorney General Bonta issued five consumer alerts advising California tenants of their rights and protections under state law, and alerting property managers and landlords of their obligations to tenants. The consumer alert on security deposits can be found here. It is also available in Spanish, Chinese, Korean, Tagalog, and Vietnamese. 

A copy of the stipulation and proposed amended judgment, which details the settlement terms and remains subject to court approval, can be found here and here.