The law is VERY clear. The landlord has 21 days to send an itemized statement of damages with a receipt and/or estimates. If he canot get it in 21 days, then he can get one 14-day extension if he advises that the receipts are not ready yet and it is mailed prior to the 21-day time period elapsing. (CA Civil ode 1950.5; Granberry v. Islay Apartments, 9 Cal 4th 738). Failure to comply with these laws means that the landlord must return to the security deposit as a whole and sue to collect.
Now, you have been served with a lawsuit. It would be best to sue him back for the security deposit not returned. Worst case scenario is that you lose both case. Possible scenario is that you both win and that you will owe a small amount that is in excess of of what you won.
I STRONGLY encourage you to speak with a lawyer that knows about Small Claims and Landlord-Tenant law. Myself and other attorney's here have commented on this topic and could provide the assistance that you need.
-Adam Jaffe Law Office of Adam Jay Jaffe PO Box 2437 Camarillo, CA 93011-2437 (805) 504-2223 www.smallclaimsappeals.com Adam@SmallClaimsAppeals.com This posting is provided for “information purposes” only and should not be relied upon as "legal advice". Nothing transmitted from this posting constitutes the establishment of an attorney-client relationship. Applicability of the legal principles discussed here may differ substantially in individual situations or in different states.
The LL had 21 days to mail you a letter outlining the reasons why he withheld your security along with proof of payment in the amount withheld. And, if there is any security leftover, he must return that with the letter and proof of payment for deductions. Again, this must be done w/in 21 days of you leaving the premises.
The LL's failure to do this exposes him to liability in the amount of actual damages and statutory damages in the amount of twice the security if you can show the he withheld the security in bad faith.
The LL's violation of the 21-day rule is not a bar from him recovering actual damages against you. He is still within his rights to sue you for the repair work for the damage you, your guests and/or your pets caused to the unit.
The fact that you do not have the money will not prevent a judgment against you, assuming the LL can prove his case. The Court will allow a payment plan though.
Also, as the other attorney stated, it would be a good idea to counter-claim against the LL for his violation of Civil Code Section 1950.5 and try to make a persuasive argument that his violation resulted in certain actual damages for you and that you should be entitled to statutory damages in twice the amount of the security for the LL's bad faith withholding of the security.
This response does not create an attorney-client relationship between you and I. I am not your lawyer and I am not representing you in the underlying issue stated in your question. The response I have offered is not intended to be relied upon, you should seek out an attorney to assist in this matter.