When closing on a multifamily apartment, how are tenant deposits handled?

Question

Melanie P. · Answer

Credit at closing. Pay close attention to your closing statement to make sure the security deposit amounts correspond to what is stated in the leases plus any accrued interest. If the seller claims no deposit make them get Certificates of Estoppel from the no deposit tenants.

We also use the security deposit transfer as a lever to get the tenants onto our landlord focused lease. We tell them that we are now responsible for the security deposit they paid and would like to get them a lease stating that for their records. Then we talk to them about lease terms, rent step up at end of existing term or average it out, etc. They don't have to sign with you but all of ours we hit with this really want something in writing saying you have their deposit money.

Caleb Brown · Answer

In my area they are credited to you at the closing table. I have also seen checks sent outside of closing instead of crediting them

Russell Brazil · Answer

You will want to have the security deposits and any interest be debited from seller and credited to the buyer through the closing. Then the buyer should take that money and put it into an escrow account.

Nathan Gesner · Answer

It's usually a credit at closing, but it can also be transferred by check outside of the closing. I highly recommend you have this in writing in the purchase agreement. The transfer of prorated rents and security deposits is not automatic. Many sellers will try to sneak off with it.

When closing on a multifamily apartment, how are tenant deposits handled?

When closing on a multifamily apartment, how are tenant deposits handled?

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