Tenants threatening at move-in

Esteemed colleagues,

I’m facing a tough situation and would appreciate your perspective.

On August 9th, three students (with their parents as guarantors) placed a deposit on my 3-bedroom Victorian near a college campus. As is common here, the prime leasing season is July through mid-August, and once school starts, demand drops off sharply. Accordingly, I removed the unit from the market after their deposit.

Their lease start date was today, August 16, 2025. However, when they arrived with their parents for move-in, they “freaked out.” This is an older Victorian (not a modern apartment), but it is clean, habitable, and up to code. The students had toured it in person before applying. We take pride in maintaining our properties, though of course, they aren’t new construction.

The tenants are now refusing to pay first month’s rent and sent the following notice citing habitability issues under California law (Civil Code §1941.1 and implied warranty of habitability). Their claims include:

• Mold and old food around stove
• Mold on walls
• Blood stains, dead insects, dust throughout
• Dirty stove/microwave, bathroom unsanitary
• Windows unclean with missing/damaged screens
• General filth, unswept floors
• Showerhead replacement needed

They are demanding deep cleaning, mold remediation, replacement of window screens, painting, etc. and state they will withhold rent until this is completed. They’ve also threatened complaints to the local housing authority/code enforcement.

From my perspective:

• The unit was cleaned and is habitable.
• It’s not new, but it was shown in person before application, and the condition hasn’t materially changed since.
• We pride ourselves on keeping units up to code and in good repair.

My concerns:

1. I held the property for them during peak leasing season and may now be stuck with a vacancy.
2. They’re making demands that feel like buyer’s remorse rather than legitimate habitability issues.
3. They are refusing to pay move-in rent, even though they signed a lease and provided a deposit.

Questions for the community:

• How would you handle this?
• Is this a case where I should meet their demands hoping this will not continue , or is it better to cut losses and move on?
• Has anyone dealt with similar “last-minute” habitability disputes where tenants change their minds after committing?

Any input on best practices or legal/strategic next steps would be greatly appreciated.