Security deposit and Pro rated rent

6 Replies

When buying a rental property, do you put a clause in the contract that collected rents will be given to the buyer at closing in a pro-rates fashion? Also, what about security deposits? Or is this part of the usual closing process like getting keys to the property? Is the seller legally obligated to turn over such funds to the buyer? Thanks

Bilal

@Bilal 

The lawyer working with should be well aware of this to incorporate into the P&S. Your agent also should have discussed how best to handle this because the seller may choose to only transfer the deposit and the last Month if he is holding them. If the closing is hapenning at the end of the month then you are only entitled the deposit+last if any. If not, you discuss as i said above. If the are TAW (Tenant at Will) then, there usually none of the later.

Speak to your agent, then make sure you discuss with your lawyer.

Good luck!

@Bilal A.

I cannot comment on the legal technicalities of your question - i.e. whether a contract clause is needed, but my non-lawyer understanding is that deposits and pro-rated rents legally belong to the buyer and must be transferred at closing.

On the practical side, having processed thousands of closing documents over 20+ years, I can tell you that this transfer happens on less than half of the closings. This is because the title company can't care less, the seller is not motivated to give up extra cash, and the buyer does not know better. 

When you're a buyer, it's 100% your responsibility to ensure that you receive credits for this money at closing. I would first check with the title company and ask if they're going to take care of this automatically. If they say yes, it should be good enough. If they say no, then ask a real estate lawyer how to make it happen. Again, I'm not a lawyer, so cannot give you legal advice.

@Bilal A.

I usually get affidavits from all tenants to verify terms of each lease  prior to closing. Review all leases and verify amounts, deposits, terms, dates, discounts, etc. to make sure everyone is on the same page. 

@Bilal A.

I usually get affidavits from all tenants to verify terms of each lease  prior to closing. Review all leases and verify amounts, deposits, terms, dates, discounts, etc. to make sure everyone is on the same page. 

@Taoufik K.  

@Michael Plaks

@Carl Fischer

Thank you all for your insight. The title companies and most realtors are paper pushers and plug n play type. You are right that it is up to us consumers to do the due diligence. Would love to eventually remove these “middle men” from the equation. 

Bilal

@Bilal A.

Exactly -who watches your money better than you? Build your systems and team and it will be easier, maybe even routine, in the future.