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Boise’s Sanchez introduces overreaching landlord-tenant ordinance

Boise’s Sanchez introduces overreaching landlord-tenant ordinance

Matt Tobeck
October 2, 2020

Some people have noted that Idaho is a fairly landlord-friendly state — perhaps too friendly.

In an effort to change that, Boise Councilwoman Lisa Sanchez introduced a security deposit ordinance at this past Tuesday’s city council meeting

If enacted, her proposed ordinance would require rental property owners in the city of Boise to create and maintain a separate in-state account that can only be used for security deposits. It would also require rental property owners to maintain a list of names and addresses for each person paying the security deposit, as well as the amounts deposited. Lastly, it clarifies that tenants are the owners of those security deposits rather than the rental property owner. 

At first glance, this might seem like a laudable effort to better secure tenant rights. Too many people, after all, have had the unfortunate experience of getting stiffed out of a security deposit by an unscrupulous landlord at one time or another. Certainly, we should do everything we can to make sure that doesn’t happen and that security deposits are safeguarded and then returned to the tenants. 

Fortunately, Idaho state law already protects renters’ security deposits. 

According to Idaho Code, landlords are required to remit security deposits to tenants within 30 days of their lease ending and their leaving the premises, if not earlier than that in certain circumstances. Landlords are also not permitted to retain any portion of a deposit in order to pay for anything constituting “normal wear and tear.” 

Further, if any portion of a security deposit is retained by a landlord, Idaho Code also requires that landlords provide renters “a signed statement itemizing the amounts lawfully retained by the landlord, the purpose for the amounts retained, and a detailed list of expenditures made from the deposit.” 

In light of all of these requirements, what exactly is the purpose of mandating the creation of separate accounts for security deposits and, additionally, stating that security deposits belong to the renter?

I talked to Paul Smith, Director of the Idaho Apartment Association to get his take on the proposed ordinance. 

In his view, there are people in Idaho who are simply trying to punish landlords for what they view as a landlord-friendly system, in part frustrated by the rising costs of housing in the greater Boise area. Perhaps it never dawned on Sanchez that adding further mandates onto landlords adds to administrative costs, thereby increasing housing prices. Smith disagreed that a need existed for this ordinance and stated his belief that such ordinances are merely “solutions in search of problems.”

I asked Smith if Sanchez had contacted him about the proposed ordinance. He informed me she had not. Interestingly, Councilman Patrick Bageant had a similar question for Sanchez during Tuesday’s meeting. He asked Sanchez if she had spoken to anyone representing landlords to see what they had to say about the ordinance. Her response: “I haven’t spoken to them directly.” Despite this, Sanchez assured Bageant that she believes landlord associations were “very supportive of this.” Count me as a skeptic on that claim. 

What then would this ordinance accomplish, given I.C. § 6-321 already offers numerous protections for tenant security deposits? 

According to a memorandum Sanchez wrote to Boise Mayor Lauren McLean, its purpose is to prevent the commingling of security deposit funds with other funds a landlord controls in the event of any “bankruptcy, transfer of ownership or sale proceedings.” According to Sanchez, doing so will help better track ownership of security deposits, and in so doing help ensure they are ultimately returned to tenants if any of those events were to transpire. 

It’s curious that “transfer” is mentioned in that memorandum as an area that needs clarification regarding renter protection, as the Idaho state law just mentioned also addresses that potential issue.

It reads, “If security deposits have been made as to a particular rental or lease property, and the property changes ownership during a tenancy, the new owner shall be liable for refund of the deposits.” 

Because this section of code clearly states if a property changes in ownership that the new owner will be liable to a tenant, there’s not any issue here that needs clarification. Separate account or no, the new owner would be liable to a tenant, thereby establishing protection for the tenant in the case of such a transfer. 

That effectively leaves bankruptcy as the impetus behind Sanchez’s proposed ordinance. However, according to Smith, a landlord bankruptcy that leads to withholding  a security deposit is an exceedingly rare event. In his opinion, it is so rare that it doesn’t make any sense to use it as a pretext for the hassle and overhead of requiring every rental property owner in Boise, both commercial and residential, to create separate accounts for security deposits.

In addition to needlessly mandating that rental property owners create and maintain separate accounts for security deposits, the proposed ordinance would “clarify that a tenant is the owner of its security deposit.” 

However, if a tenant were the owner of a security deposit, how exactly would a security deposit offer any “security” to rental owners? The whole purpose of having security deposits is to grant property owners the ability to use those funds in the event of damage to the apartment or non-payment. How can rental owners do this if the “tenant is the owner?”

At Tuesday’s Boise council meeting Bagaent asked Sanchez a similar question. He stated that considering many bankruptcy courts have treated security deposits as belonging to the landlord, “the question is, and I think it’s probably a legal research question, do we have the authority to do that, does the city have the authority to change the ownership of that money?” 

Mary Grant, an attorney for the City of Boise, assured Bageant the proposed ordinance was not a matter of ownership, but merely of separation. However, if you look at Sanchez’s words at that meeting, as well the proposed ordinance itself, this ordinance absolutely does have to do with ownership, an issue potentially both legally problematic and, again, one that undermines the whole reason for security deposits in the first place. 

Unfortunately, this newly proposed ordinance is just another solution in search of a problem. If passed, it would saddle all rental owners in Boise with another set of pointless regulations, making their lives more complicated than necessary and further increasing housing costs by increasing landlord overhead. The proposed ordinance also effectively undermines the entire purpose for which security deposits exist, namely, to protect rental property owners. In short, if the city council wants to make the renter-landlord relationship equitable, this ordinance would be a step in the wrong direction.

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