California Real Estate Practice Exam

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What can be done with the security deposit upon the sale of a residential rental property?

Must be refunded to the landlord
Transferred to the new owner or returned to the tenant
Must be used for property repairs
Held until the end of the lease term

The correct answer is: Transferred to the new owner or returned to the tenant

Upon the sale of a residential rental property, the security deposit can either be transferred to the new owner or returned to the tenant. This option allows for a smooth transition between owners and ensures that the tenant's security deposit is properly handled. Refunding the security deposit to the landlord (option A) would be incorrect and could be seen as a breach of trust towards the tenant. Using the security deposit for property repairs (option C) is also incorrect as it is meant to be a refundable amount held for potential damages caused by the tenant. Holding the deposit until the end of the lease term (option D) is not necessary and could cause issues if the tenant decides to move out before the lease ends.