My question involves landlord-tenant law in the State of: California
My wife and I rented a small house in Orange County. The lease was for 1 year. Shortly after moving in, we found that the house is infested with rats living in the attic. We immediately notified the landlord on January 24. We agreed with the landlord via email to hire a pest control company to address the problem. The pest control company came out several times to patch holes, set traps in the attic, and clean up the mess. Unfortunately, their efforts did not resolve the problem. We know this because we could hear the rats chewing, scratching and running around in the attic at night. On one occasion I had to climb into the attic myself and crawl through rat feces and urine to retrieve a dead rat which was stinking up the entire house.
After putting up with this for about a month, we decided to move out. As I understand it, if a property is "untentable" then California Civil Code section 1942 gives us the right to "vacate the premises, in which case the tenant shall be discharged from further payment of rent". On February 23 we notified the landlord via email that we were moving out. We sent her the keys through the mail with a letter informing her that we moved out. The keys and letter were delivered to her on February 28 and I have a certificate of mailing.
We have been in touch with the landlord since moving out because I emailed her and asked her to reimburse us for the money that we paid to the pest control company. She did reimburse us with a check that we received on March 7. However, it has now been more than 21 days since we moved out, and she has not returned our security deposit or provided us with a written explanation for withholding it. I emailed her yesterday to ask for the deposit, and she replied today indicating that she has been out of town and would "take care of it" tomorrow.
In light of the above facts, I would like to get advice on the following questions:
1. Since the landlord has blown the 21-day time limit for returning my deposit or providing a written explanation for withholding it, how good is my case for a "bad faith" retention by the landlord? What elements are required to prove "bad faith" on the part of the landlord? I understand that if the court determines there was bad faith then I could potentially be awarded my deposit plus damages in the amount of twice my deposit.
2. California has an implied warranty of habitability and it seems that a rat infestation may be a breach of the implied warranty of habitability. If so, would I then be entitled to a refund of all rents paid plus my moving expenses? I paid rent for the month of February and a partial month's rent for January.
I haven't quite decided what I'm going to do here. If the landlord voluntarily returns my security deposit without any more trouble, I may not pursue the matter further. However, if she refuses to return my security deposit then I will almost certainly file an action in small claims court. What are your opinions on how I should proceed?
Thank you for your advice. This has been an extremely stressful situation for me and my wife. We've never dealt with a problem like this before and were really surprised at how it took over our lives.

