Arnel Settles Allegation of Keeping Renter Security Deposits

Arnel Management has agreed to pay nearly $1.2 million to settle a state charge that it illegally withheld security deposits from apartment tenants, the state attorney general announced.

The Costa Mesa-based company led by Kevin Hauber paid the settlement nearly eight years after the Los Angeles Times revealed the landlord had deducted hundreds of dollars for unneeded cleaning and repairs when tenants left their units spotless, the Times reported.

The settlement marks the second for Arnel, a unit of Arnel & Affiliates, which settled allegations it illegally withheld security deposits in 2001.

As part of the settlement, Arnel must pay $1.15 million, with $650,000 going to legal aid organizations in Orange and Los Angeles counties. The attorney general’s office also said Arnel would be “subject to more stringent injunctive terms to deter future misconduct.”

“For many renters, especially those from lower-income backgrounds, affording a security deposit entails a great deal of sacrifice,” Attorney General Rob Bonta said in a statement. “We are holding Arnel accountable.”

Neither Arnel nor its attorney responded to requests for comment from the Times.

The firm has 18 apartment complexes in OC and one in Los Angeles County.

According to state law, landlords can’t withhold a deposit to clean an apartment left in the same condition as when a tenant moved in, or to pay for fixing ordinary wear and tear.

Arnel charged for unneeded cleaning and repairs and treated part of its tenant’s security deposit as nonrefundable — no matter the condition of the apartment, according to the attorney general.

Arnel faced similar allegations in 2001, when OC prosecutors filed a consumer-protection lawsuit against the company with the hope of obtaining refunds for wronged tenants. But then-District Attorney Tony Rackauckas ordered that the lawsuit be withdrawn so officials could seek an out-of-court settlement with the firm.

Rackauckas, who had accepted campaign cash from Arnel, was widely criticized for taking a personal role in his office’s investigation.

In 2016, Arnel, owned by billionaire political power broker George Argyros, was the fifth-largest landlord in Orange County, according to the Times.

It’s unclear what Argyros’ current role is with Arnel. Stephanie Argyros Gehl, a Newport Beach-based Realtor and president of Arnel Estates, serves on its board of directors, according to state business records.

The 2001 settlement allowed Argyros to become ambassador to Spain; his appointment had stalled during the controversy.

— Dana Bartholomew