My question involves a security deposit in the State of: CA
So I guess here's the story. Three friends and I have been apartment/house hunting lately in a college town where the demand for housing is high. At an open house, we saw what we liked and because there were several other groups that seemed enthusiastic about the place, we provided the LL with a holding deposit and an application form. No lease was signed, no form regarding the holding deposit, the only signature provided was on the app and the check -- we weren't even sure they would give us the place.
It's been about a week and a half since then, we've been hashing the details out with the LL via email, and he just gave us a copy of the lease (via email). There are several provisions in it that we weren't expecting (regarding usage of certain rooms in the house, how utility bills will be split, etc.) and to be honest, at this point we simply have a bad taste in our mouth with regards to the whole situation.
We informed him over the phone that we are no longer interested, and he immediately responded (via email) that either we can leave him the entire holding deposit as penalty, or else he will attempt to enforce the lease (which we never signed).
The house is still occupied (and will be until June 1, when the current tenants must move out), and it's highly unlikely he would have trouble finding someone else to rent it to before then -- thus his chance of losing money on rent is very low. I could understand if he wanted to withhold part of the holding deposit to cover his costs of drawing up the lease, time spent emailing us, etc., but can he really demand to keep the whole thing?

