O.C. Rent Firm Is Accused of Deposit Fraud
SANTA ANA — In one of the most sweeping consumer actions ever mounted by the Orange County district attorney, prosecutors Tuesday filed suit against a Garden Grove property management firm accused of illegally withholding security deposits from hundreds of apartment renters.
Superior Court Judge Leonard Goldstein also issued a preliminary injunction against the firm, Elerding Properties, prohibiting its operators and employees from withholding refundable deposits, falsifying records, or inflating repair and cleaning bills sent to former tenants.
The lawsuit alleges that over the last four years, Elerding Properties has “engaged in and (is) still engaging in certain acts of unfair, unlawful and fraudulent business practices.” It seeks restitution and at least $2,500 in penalties for each alleged violation, according to the complaint filed in Santa Ana.
While the number of affected renters is still being tallied, “This is one of the most widespread violations of consumer laws that our unit has had to deal with,” said Deputy Dist. Atty. Chris Kralick of the office’s consumer and environmental protection unit.
Attorneys for Elerding Properties have maintained that the firm is not guilty of any wrongdoing and that it will contest the lawsuit. The firm’s lawyer, Arthur Morello, was unavailable for comment Tuesday.
Officials with the Orange County Fair Housing Council say the failure of landlords to promptly refund security deposits is a significant problem that contributes to homelessness. During its last fiscal year, the agency received 5,278 complaints of non-refunded security deposits valued at about $2.85 million.
“Most of these (renters) could not afford the loss of this money at a time that it was needed for relocation,” fair housing officials wrote in a recent report to the Orange County Community Development Council. “Consequently, hundreds faced homelessness due to the wrongful taking of their deposits. . . . Many managers have virtually institutionalized their own process so as to be in a best position to take a helpless tenant’s money.”
The Times reported five weeks ago that at least 113 renters had filed small claims suits against Elerding and that the Marine Corps had taken the extraordinary step of removing the firm’s 10 Orange County and two Los Angeles County complexes from its approved housing list.
Several hundred other former renters have not filed suit to recover their security deposits but have written letters of complaint to Elerding Properties, according to two company employees who asked not to be identified for fear of losing their jobs.
The district attorney’s complaint does not specify the number of alleged violations uncovered by investigators. But Deputy Dist. Atty. Kralick said several investigators have been working full-time during the last month to compile a complete list of the renters whose deposits were illegally withheld.
“They are literally going through thousands of documents,” Kralick said.
As soon as the list is completed, Kralick said he would file an amendment to the lawsuit along with a list of alleged building violations. The Orange County Environmental Health Division had received at least 43 complaints since January of 1989 of substandard housing conditions at some of the firm’s apartments.
The lawsuit names as defendants the estate of Dr. Charles E. Elerding Jr., his wife, Janet R. Elerding, two trusts held in each of their names, and their three sons--Charles III, James and Joseph Elerding.
The senior Elerding served as company president before he died of cancer last May. Two years ago, he was featured in Sports Illustrated when he and his wife provided a $1.75-million endowment to the USC football team--the largest single contribution ever made to the school’s athletic program.
The lawsuit also identifies 10 apartment complexes and 27 other properties owned and operated by the rental company. The Orange County complexes owned by Elerding include: Amberwood in Buena Park; Casa Madrid in Cypress; Mountain View Apartments and Villa Viejo Apartments in El Toro; City Park Plaza in Garden Grove; Huntington Apartments and Bahia Puerto in Huntington Beach; Tustin Arms Apartments in Orange, and Cerritos Apartments and Pine Tree Apartments in Stanton.
Under the California Civil Code, a landlord is allowed to withhold all or part of a renter’s security deposit to cover nonpayment of rent, clean the premises or repair “damages to the premises, exclusive of ordinary wear and tear.” Within two weeks of the termination of a tenancy, the landlord is required to give every former renter an itemized statement listing the basis for any amount that is being withheld.
Several renters’ groups have charged that some landlords arbitrarily withhold the entire amount or a portion of the security deposit by claiming that the apartment needed repairs.
However, the injunction specifically enjoins officials of Elerding Properties from “falsifying any ‘vacating statements,’ or inflating expenses listed on ‘vacating statements’ when determining the cost of restoring a vacated unit to its original condition.”
As part of an agreement struck with the district attorney’s office, Elerding Properties has agreed to make available to investigators copies of all written rental agreements for four years after the termination of each tenancy. The firm has also agreed to allow its employees and apartment managers to be interviewed by district attorney’s investigators.
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