Upon sale of residential rental property, what may happen to the security deposit?

When a residential rental property is sold, the handling of the security deposit can involve different outcomes, based on the agreements made during the sale. The correct answer indicates that the security deposit may be either transferred to the new owner or returned to the tenant.

Transferring the deposit to the new owner is a common practice, allowing the new landlord to take over the existing lease and continue to manage the property. This way, the security deposit remains intact and is managed according to the existing lease agreement between the tenant and the new owner. Alternatively, the previous owner may choose to return the security deposit to the tenant at the time of sale, especially if there is an agreement or if the lease term is ending. This allows for a fresh start for the tenant with the new landlord, who can then reassess any deposits based on their own policies.

In contrast, the other options do not reflect the typical legal standards regarding security deposits during a property sale. Refunding to the tenant is not always necessary if the lease is still in effect, while simply keeping the deposit by the previous owner or declaring it non-transferable does not adhere to the established tenant rights and obligations laid out in California's landlord-tenant laws. The transfer or return of the deposit ensures that