Under Civil Code 1950.5, security deposits can only be used to pay unpaid rent, repair damage beyond normal wear and tear, clean the premises and remedy future rent defaults, so that any remaining balance must be refunded.
There is no such thing as a "holding deposit." Civil Code 1950.5(c) states:
A landlord may not demand or receive security, however denominated, in an amount or value in excess of an amount equal to two months' rent, in the case of unfurnished residential property,
and an amount equal to three months' rent, in the case of furnished residential property, in addition to any rent for the first month paid on or before initial occupancy.
Finally, the landlord must provide the tenant with entitled to an itemized statement of the deductions from the security deposit within 21 days. Civil Code 1950.5(g). If the landlord fails to do so, the landlord must refund the full deposit, but can sue for damages. Granberry v. Islay Investments, 9 Cal.4th 738, 745 (1995).
You should consider making a written demand on the landlord for failure to return your security deposit. If the landlord fails to do so, you should consider making a claim for bad faith retention of your security deposit, which allows for an award of treble damages. Civil Code 1950.5(l).
He must return your entire deposit because that was your agreement. He breached your sublease by not having the place available in the way he promised. He offered to terminate the lease in exchange for the return of your deposit. He now must make good on his promise.
Your facts are a bit nebulous, but based upon what you posted, you ought to be entitled to a full refund of your deposit if the sublessor was unable to perform.
Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is general in nature and is not intended, nor should be construed, as legal advice for a particular case. This Avvo.com posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult with your own attorney.