BiggerPockets

Hello!

I posted this earlier in the "Renter's Forum" ...

I recently found a house being leased that I applied and got approved for. The house is managed by a property management company representing the landlord.

The house is already in move-in condition. A previous applicant was approved but backed out because of financial problems, I was told. It was verbally agreed upon that my intended move-in date of mid-February (about a month from now) is fine with the land-lord. The property management requires that I put a holding deposit of a sizeable amount so that the house can be taken off the market listings. This deposit is non-refundable if I decide to back out and not rent the house anymore. In addition, the property management requires that:

1. the deposit be made in money-order or cashier's check (ie, no personal checks accepted)

2. the rental agreement be executed near the official move-in date (ie, about 2-3 days prior)

Are the two requirements above legitimate? I'm concerned that after I put in my non-refundable deposit, I'll be "pressured" to accept the actual terms of the rental agreement when it's finally drafted. Because if we do not agree on something in the agreement and I refuse to sign it, they might say that I'm backing out and hence have to forfeit my deposit. How can I protect myself against this possibility? I'm willing to sign the actual rental agreement and put down the full deposit and first month rent anytime.

Thank you in advance for any inputs, and best wishes.

Ima Renter

The management company implied both, because of this: I asked if I can see the lease document soon and they said that they only write the lease 2-3 days before the move-in date.

Yes, they also said they use same lease template ( a standard state document) for all their managed properties. I asked for one and they provided the blank template. But obviously a blank template does not have the details contained in the actual lease document to sign.

I'm just concerned as to why they are not willing to sign the lease right away, when I am. I expressed that I can put the whole deposit and first month's rent, even though I'll be moving in a month from now. What's the difference between signing it today and later?

I like my renters to sign the lease as soon as possible to lock them in. Plus I have their holding deposit which is non-refundable if they bail.

Sounds screwy that the PM won't finalize the lease until a couple days before move-in. As you know, they could put in any number of unacceptable clauses that would cause you to bail and lose your fee. Plus, what's to stop them from renting it out to someone else who offered more right before your lease signing? You'd get your fee back but have no place to stay.

Personally, I wouldn't hand over a dime without also having an acceptable lease signed by both parties.

Finding good tenants is like finding gold in this business. If the PM doesn't know that, or they're playing games, then you do not want to enter into a relationship with them.

Keep us informed and best of luck.

Thanks much John, Mark and Mike for the insightful inputs. Your points pretty much cover both renter and landlord points of view. John, I am in California, btw. I am looking that far ahead to sign the lease because I really like this new place, and want to lock it in. My current lease expires about the same time, a month or so from today.

Why the property manager verbally said that a move-in date as far as month from now is okay, but at the same time declines to execute a lease agreement soon, remains a mystery to me.

I plan to propose the following to them, and just walk away if they are not agreeable to it:

-they write up the lease agreement as soon as possible and provide it to me; I'll review, sign and return it the next business day if all terms are agreeable; otherwise they find a new tenant

-I give them a money order / cashier's check covering the sum of the full deposit and first month's rent on the same day I return the signed lease agreement

The above proposal sounds fair to me. It does not create a situation where I get the keys but not move in, because I will have committed with the deposit and first month's rent by then. At the same time, I ensure that all lease terms are agreed upon before I commit and sign the lease. Lastly, asking them to act on this proposal ASAP minimizes us wasting each other's time.

Do let me know what you think of this. Grateful to all of you!

Mike - I like your policy of getting both the deposit and first month's rent before signing any lease. I will do so from now on.

Wow! -- this may be the first time I've ever learned anything the 'easy' way.

Thanks.

Each state is different and some do not allow "holding deposits". Massachusetts, of course, is one of those. But, assuming it's legal...

You can always sue them in small claims court if they do try some kind of pressure situation at lease signing using the holding deposit. If you have a blank copy of their template lease, keep it. Go to the lease signing and try not to walk in with a chip on your shoulder.

I'd think most judges would side with a tenant if your worst case scenario happens. I agree with Jon's assessment of why the landlord likes this situation. Remember, landlords want the vacancy filled so it's also in their best interest to get the lease signed 3 days prior...you backing out is a bad thing for them, even with a holding deposit they're likely to lose money.

You still have leverage.

I did go ahead and asked if the place can be rented lower. The rents in our area are have been quickly going down, anyways.

Simply put, 1. Yes, and 2. Yes

Here's why. If you tell me you are going to rent my home in the middle of March and I stop showing it to prospective tenants/applicants and then you decide NOT to rent it for whatever reason then I am stuck holding the bag. It would then be near impossible to make up for the lost time and the cost that I incurred by the vacancy.

This is very common practice and if you want to feel more protected, don't agree to the 'hold deposit' until you see a copy of the lease that you will be required to execute. This lease needs to be called "exhibit A" in writing and that it is agreed that you and the management company will be signing 'exhibit A' lease at the time of move in. This way, you know what you are getting into before you give them the deposit.

If you move forward with this (again, its very common) just make sure that you get copies of all of the paperwork with ALL signatures and a receipt for your deposit.

Lastly, keep in mind that you have just as many rights, if not more, than the owner when it comes to landlord/tenant law and if you need help understanding the lease that you have an attorney look at it before you sign it.