California Property Crimes: Homestead, Real Estate, and Security Deposits

What do California laws about homesteads, adverse possession and security deposits have in common? All involve property, and all are highly regulated in California. Anyone who is filing for a homestead exemption, claiming property by adverse possession, or dealing with a security deposit in this state must follow the law carefully. Don't expect anything to be intuitive regarding the requisite procedures.

There may be states that still allow a person to get title to land by staking out a homestead, but those are found only in the history books in California. When someone talks about protecting assets by filing a homestead, she is talking about the California homestead exemption. This ​exemption protects the equity​ in a home from sale by creditors and in bankruptcy proceedings up to the maximum amount set out in the statutes.

What is protected? The homestead exemption can protect a home, a condominium or even a boat if the individual resides on it. Note that the residence can still be sold by creditors or in bankruptcy, but the debtor ​gets a set amount of the equity​. If the equity in the home is less than the homestead amount, the creditor has no reason to go ahead with the sale. The same system applies in bankruptcy court.

​Read More:​ Do It Yourself Bankruptcy in California

The law is intended to keep debtors from ending up homeless by protecting some of the equity from their home or residence. How much? That depends on the age and other circumstances about the debtor. Here are some examples, but other circumstances may increase these amounts:

• a single person: $75,000.
• a married person when no other family member has a homestead: $100,000.
• a person over 64 years old: $175,000.
• a disabled person: $175,000.

If a judgment creditor tries to sell a debtor's house, the debtor gets this homestead exemption amount first from any sales proceeds, before the creditor gets anything at all. One exception is if the debtor voluntarily put up the house as security for a loan; in this case, there is no homestead exemption.

The rules about claiming a homestead exemption are quite specific. Anyone who ​owns a home automatically has a homestead exemption​. He need not do anything to get basic protection from judgment creditors. However, he can also file a written claim to a homestead exemption with the state, which offers more protection.

That is, the automatic exemption applies only against a ​forced sale​ by a creditor when the proceeds would not be enough to pay both the homestead and the creditor. For example, a single person with $75,000 equity in his house would be fully protected by the automatic homestead exemption from a forced sale.

However, an automatic homestead exemption is limited to a forced sale. If the homeowner sells the house himself and a creditor has a judgment lien that attaches to his property, the judgment creditor gets paid from the sale before the debtor gets the homestead. A declared homestead exemption, however, would protect the equity if the homeowner opts to sell his house.

Nearly all states have some kind of adverse possession laws. The laws differ in their particulars, but the essence of all of them is that if an individual occupies someone else’s land for a specified period of time, and does so openly and under a claim of exclusive possession, he can end up owning that land. Usually, the important part of adverse possession is the person's “open and notorious” possession of the real property.

In California, the statute governing adverse possession is found in the ​Code of Civil Procedure at section 32​5. Adverse possession can be claimed only if the land has been ​openly​ and ​notoriously claimed​ and all land taxes paid by the person occupying it for a period of five continuous years, and:

• the land has been protected by a substantial enclosure, or
  
• it has been usually cultivated or improved.
  

​Read More:​ California Adverse Possession Laws: Federal Protection

Anyone attempting to claim ownership of real property in California by adverse possession must establish every single one of the elements set out in the statute. This doesn't mean that the person claiming title by adverse possession must take the title holder to court. Rather, when the title holder takes the person occupying the property to court, to be awarded adverse title, she must prove ​all​ of the elements.

The elements include:

• possession under claim of right;
  
• actual, open and notorious occupation of the premises constituting reasonable notice to the true owner;
• use of the property that is adverse and hostile to the true owner;
• continuous use, possession and improvement of the property for at least five years; and
• timely payment of all property taxes assessed during the five-year period.

There may have been a time when you could rent an apartment in a California city without being required to pay a security deposit. If so, those days are gone. Security deposits are sums of money a tenant must pay a landlord (in addition to rent) when she rents a unit. The landlord can use the deposit to clean or repair the apartment when the tenant moves out.

California landlord-tenant laws spell out the ​amount of security deposit​ a landlord can require. They also specify the rights and responsibilities for both the landlord and the tenant regarding security deposits, including what the deposit can be used for and the procedures and timing for its return.

California landlord-tenant law is found in ​Civil Code Section 1950.5​ and the following statutes. It is important to realize that these are not the exclusive laws on security deposits in the state. Many California cities, including San Francisco, Los Angeles and Sacramento, have rent control laws providing additional tenant protections as to security deposits.

Under state law, the amount of security deposit a California landlord can demand is ​capped by statute​. Different maximum amounts apply to furnished and unfurnished rental units, but each is a multiple of one month's rent. A security deposit for a furnished rental cannot be more than three times the monthly rent, while unfurnished rentals are capped at two times the month's rent.

California law ​prohibits non-refundable security deposits​. This means that all security deposits in California are refundable and must be refunded to a tenant who complies with the rental agreement terms, pays his rent on time, and leaves the unit clean and undamaged except for normal wear and tear.

The landlord can only keep part of the security deposit if:

• a tenant leaves owing back rent;
  
• a tenant or his guest or pets damages the unit and he failed to repair that damage; or
  
• a tenant leaves the apartment dirty, that is, not as clean as it was when he moved in, minus normal wear and tear.

California law gives the landlord ​21 days from the day a tenant vacates​ to return the security deposit. The landlord must provide ​written documentation​ for any deductions made from the deposit for unpaid rent, damage to the unit or necessary cleaning. Invoices and receipts are also required if the amount deducted is more than $125.

If the landlord doesn't return the deposit, the ​tenant can go to court​ to seek the money. If the tenant wins, she can receive the amount of the security deposit, plus twice the amount of the deposit for bad-faith damages.

​Read More:​ California Homestead Laws: Overview & Protection Laws