Updated over 8 years ago on . Most recent reply
Seller Never Collected Security Deposits
I am in the final stages of purchasing a fourplex in Virginia and wanted to see if others had any thoughts on what my options are. In the future, this will be a question I add to my diligence checklist, but in this instance, is it reasonable to ask the seller to make a purchase price concession to account for the missing security deposits? The seller simply did not collect security deposits for three of the four units and did not mention this fact at any point up until now.
As security deposits are the tenants money, it is not necessarily a perfect solution to ask the seller to cover these amounts, but it also creates great risk on my end if there are no security deposits in place.
As I see things, my options are: (i) eat the cost; (ii) have seller adjust the purchase price down by some agreed upon amount; (iii) have seller write a check for the missing security deposits; or (iv) have inherited tenants pay a security deposit when we take over the property. None of these seem perfect, but I am wonder if there are reasons one might make significantly more sense than the others.
Would love to hear any thoughts on the matter. Thanks in advance!
Most Popular Reply
I've had to deal with this before. Never a perfect solution but for good deals sometimes we have to deal with sellers who weren't great landlords.
Did the leases state that deposits were collected? If so I think you have a really strong case for having the seller pay you since it was their error.
Once I receive leases I always get the seller to sign an addendum authorizing escrow to withhold deposits and pro-rated rents and list out the amounts.