ExampleA tenant brings suit against the landlord to recover unreturned security deposit. The landlord did not comply with the summary deduct-and-retain procedure of CC §1950.5(g). The landlord, however, may claim a right to retain a portion of the security deposit (i.e., the landlord’s CC §1950.5(e) damage claim) by the equitable defense of setoff.
When the landlord’s damages claim is raised by the equitable defense of setoff, you may determine, in an appropriate case, that it is barred by any of the generally applicable equitable defenses—including laches, unclean hands and estoppel, or that the claim is time barred. The landlord’s bad-faith retention of a tenant’s security deposit also exposes the landlord to a statutory damages penalty in addition to liability for the aggrieved tenant’s actual damages. [See §2.08.]