Being cheated out of rent&sec deposit for tenanted property sale

[Stephan Meister]

I need some advice on how to proceed. I may have committed a rookie oversight when I bought my first tenanted rental last month (only my fourth rental property, overall) from a whole seller in Indianapolis.

Everything went swimmingly and I did not notice that the pro-rated March rent and security deposit was not dealt with in the purchase agreement or the final closing documents. After the successful transfer of the deed, the keys and the lease agreement on 3/5, my property manager requested the security deposit and I forwarded that request to the last property manager who in turn sent me to the whole seller. That's when things started to go South.

The whole seller claimed that according to the purchase agreement, the rent would not get pro-rated and was "a net to the seller" and that the tenant had not paid a security deposit.

The former, first claim is definitely a lie since I have read the purchase agreement and it does not mention the rent anywhere. The sale was on 3/5/21 and so we are talking about most of the rent for March. The second claim about the security deposit, I have not verified with the tenant, yet, but I find it hard to believe. After all, the property was professionally managed, the lease required a security deposit and the tenant had been living there for 11 months before renewing the lease for another year.

In an ideal world, this would have been dealt with at the point of sale by the title company, I guess. However, now that I am at this point, what recourse do I have? Thus far I have kept it civil but if I don't hear back by day ten of the initial request, I fear I have to escalate this a bit - or cut bait and accept my loss. What would you do?

[Russell Brazil]

If it wasnt addressed in the contract, you owe the security deposit out of your own pocket.  Always include prorated rents, security deposit and interest if applicable in your contracts going forward.