BiggerPockets

Scott,

Why did you give them the keys without a signed lease and cleared security deposit check?

PG

YES - Of course you can change the lock ... they don't have a lease, they don't have a foot to stand on in court. They can also be filed with trespassing!

I would call your lawyer. Here in CO, handing over the keys is considered legal transfer. However, I've only discussed this point with my lawyer in the other direction. That is, if the tenant hands over the keys they have relinquished possession of the property. Not sure if me handing them the keys would constitute giving them possession. But I would not chance it, given what I know.

You accepted money and gave them the keys. You might be stuck with tenants whether you like it or not (on a month-to-month at the very least since no lease). First degree arson? Sounds more like criminal mischief to me. Have you tried telling them they have to get out immediately? What was their response?

Yikes, be careful - last I checked, none of us are lawyers, so you definitely want to consult with one. My suggestion would be this: get them to sign a release terminating the (unwritten) "agreement." Move quickly and tell them something like, "the city will not allow you to move into this house. I'm sorry, let's just move on from here."
While they may be on the hook for damages, you can tell them you'll go as easy as you can on them if they help you out and don't move in. If they both work, they're both potentially collectible and potentially garnishable. With all of this in mind, be careful of the fact that you have little documentation in your hands, and this could ultimately work against you in a courtroom at some point. I'd try and play nice and end it. We've all made mistakes, some cost more than others. Get 'em out and start working to fill the unit again.