Deposit back to tenant who’s leaving early?

Question

I have a tenant who signed a year lease. He’s breaking the lease after only 4 months after getting transferred. Louisiana law states that any tenant who breaks a lease and leaves early (except under some circumstances, and this isn’t one of them) must continue paying rent for the duration of the lease or until I find a new tenant, whichever happens first. This is reiterated in my lease, and my tenant says he understands. But now he’s asking when he’ll get his deposit back. I explained that landlords usually have 30 days from the time the lease ends to return any part of the deposit owed, but I’m not sure how that will work since he’s leaving early. Am I supposed to return his deposit money within 30 days of him leaving? Or can I hang onto it until (a) his lease officially ends; or (b) until I find a new tenant? I’m worried that if I don’t find a tenant soon, he might pay his next month’s rent that’s due; and then, after I return his deposit, he’ll decide not to pay any more rent. And then I won’t have the deposit money, either! The NOLA rental market, especially for the more expensive neighborhoods like the one my rental is in, has been slow. Properties are sitting on the market for months. Not sure what steps I can take to mitigate my losses. Any suggestions?

Charles Perkins · Answer

Correction increased from 21 days to 30 days this year. Along with other provisions.

Charles Perkins · Answer

Legislation passed in 2023 changed this for the state of Washington. An account must be done in 21 days. A checklist or detailed description of move-in condition is required to deduct anything from the security deposit. Signed by landlord or representative and the tenant. A move-out check is required as well. The security deposit can not be greater than the first month's rent.

Tracy Minick · Answer

In Washington we have similiar laws. However we also have a law that states that we must provide an accounting of the security deposit funds and refund (if applicable) within 30 days.

Solution: Create the security deposit move out form. Add charges for rent for the remaining months, estimated utilities, estimated cleaning and repairs and cost to re-rent (in our case: cost to PM is 1/2 a month's rent). Provide all of this and state that these are estimates and that the amount exceeds the deposit. Advise that you will update all documentation upon the unit re-renting. In the meantime work diligently to make the unit rent ready and advertise.

Adam Bartomeo · Answer

We NEVER, EVER, EVER, return a deposit until the tenant has vacated and we have inspected. In this case we would hold the deposit and use the "after repair dollars" towards the time it takes to rent the property. You will likely never get any money from that tenant unless you have VERY good collections processes.

Bill B. · Answer

USUALLY it would be 30 days after he leaves the property. Confirm with a local expert. There are usually large penalties, don’t mess that up. I assume you will easily find a new tenant within 30 days. (Otherwise you should use a PM. I assume they would easily find a tenant within 30 days. And You are literally paying more than a PM charges by having extended vacancies.). Assuming you find a tenant within 30 days of him leaving you send his deposit to his new address minus any repairs and any pro-rated rent until the new tenant moves in.

Ps. I’m pretty sure you have to start looking for a new tenant today. So he may very well not owe any money after he pays next month’s rent. Assuming you can find a new tenant for September. Doccument everything. The advertising for new tenants, anyone that applies, etc etc.

Steve Shafer · Answer

Hi @Belinda Stoner, tough situation. Landlord/tenant law varies state-by-state, so I would recommend speaking with a local real estate attorney. This should also be spelled out in your lease, which, after this situation, you will likely want to update with more specificity to address this type of scenario. With that said, in my state (CO), you have 30 days if not specified in the Lease (which can instead state 60 days) from the end of the Lease to return the security deposit. As long as the Lease is in place, you do not need to return the security deposit, one of the reasons being, is that it can be applied to unpaid rent. Until the end of the lease or until you find a new tenant, you don't yet know what his final financial liability will be, and thus it is logical that you would retain the security deposit until then. Again, this is looking through the Colorado legal lens. I highly suggest you consult a local attorney. Best of luck.

Deposit back to tenant who’s leaving early?

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