Can I terminate a lease, If I do not accept security deposit

17 Replies

I found a tenant for my single family home and everything was going smoothly. Once the lease was signed, there were a lot of problems that arose.  I did not accept security deposit or first months rent and told the tenant I will terminate the lease. He now is threatening me with law actions. I found this tenant through a real estate agent. I was told by other investors as long as no money was transferred, that this is legal. Please let me know your thoughts and I am open for questions. I know this is a legally binding contract because of all of the problems arose. I felt this would be a mistake on my part and the issues would only become greater.

Has the tenant moved in?

No money exchanged, no least that's how it works here. 

You should definitely consult with an attorney to be sure, but without an exchange of consideration, it sounds like there might not be a bona fide contract. Contract law is pretty tricky in this area; a friend of mine just went through the other side of it. The lease was signed but the prospective tenant hadn't yet delivered the deposit and first month's rent. Before it was delivered, the tenant backed out. Unfortunately, the determination was made that the case for a bona fide contract was weak without the consideration, so no further action was taken.

My advice, though: consult a contract law or tenancy law attorney.

That's what I'm hoping, and we are in Houston, Texas. They are just being difficult, they seemed like the perfect couple, but once they signed the contract. They wanted to move in 7 days later and wanted the rent pro rated. They did not want to pay rent according to the way it was specified in the lease. They kept changing our appointment date to meet to do the walk through.

Sounds like they may be professional tenants . They sign a contract and then don't honor it, an attorney should be able to answer with a free consultation over the phone.

The question what kind of problems arose.

Joe Gore

I will call a lawyer first thing in the morning.

@Joe Gore the tenant kept asking for favors before they moved in, every deadline that was given to receive funds to lease the apartment was missed. Then they wanted to have the rent prorated and move in a week later after the leased was sign and didn't have any valid reason. They did not want to pay the rent electronically which was in the lease and told me verbally that they will not pay rent on time. That was so outrageous to me, especially since they haven't moved in yet. I was shaken so I told them I would like to meet with them before I accept deposit, to explain the terms of the lease and what I expect. I printed out a copy of the signed lease so we can go over face to face. The tenant called me at 11:30 to confirm the meeting at 12 and showed up at 1:44. I was still in the area, I did not know I was going to terminate the lease until 1:16 when he texted me and said he will be their at 1:30, which he arrived at 1:44.

The tenant doesn't have a leg to stand on, but you might want to revise your method of payment and give tenants more options.

Joe Gore

as Joe said, and don't sign the lease if  you don't get the deposit.  Don't give the keys until you get the first month of payment.

@Joe Gore @Shawn Thom   Unfortunately gentleman I did not know any better. This was my first lease excited to get someone in the house. I made every mistake, I probably could have made, except actually take payment of funds and give them the keys. I learned a lot my first signing and plan on doing my due diligence to be more proactive. I am curious how  many forms of payments should be offered. I only ask because I personally thought everyone would love if, they could pay electronically or through a site. I am a young guy and new to this arena, but I have only paid rent through the internet and have never had to go and write or deposit a check or money order. So I assumed this would be the standard.

This is definitely something to consult an attorney about asap and I know you've already been told but now you know never to sign a lease without getting the money up front. I don't know who you use to process your rent payments but they have to show up to lease signing with a voided check and have to sign the electronic rent payment agreement right there. 

I don't suggest you do this at all cause it could get you in trouble but if this happened to me and they haven't moved in yet I would be on my way to that house right now to change the locks. They sound like nothing but trouble.

@Ervin Taylor in addition to the advice of talking to a lawyer, i'd also suggest you sign up for prepaid legal. I used legalshield. You can get plans as low as $14 mo. I did that when I was first starting and they spent tons of time with me explaining things, going over my operating agreement for my LLC, pointing out red flags etc. I was amazed at how much time they spent for what I was paying. In that scenario they are great. I suggest you spend $14 or the $35 plan and talk to them as well.

PS, I do not work for or get any compensation from them.  Just a happy customer.

@Shawn Thom will do, thanks again for the help everyone.

Ditto on what every one else has said. My two cents: I would get online and look up your tenant landlord act and search through the documents and confirm that there is no transaction if in no money has been accepted. But like everyone else is saying, definitely worth a call to an attorney for sure.
Just a suggestion, in the meantime look up with your local realtor MLS provider agency or group and see if they offer any classes in property management. When I first started in multi family housing, I attended a course, it cost 275 back in the day. It was a 56 hour course taught by really amazing professionals and covered everything from vetting a prospect to our state laws (tenant landlord act) to leasing, marketing, valuation of properties, cap rates, cash on cash return etc.
As for these jokers you're dealing with, I agree probably professional renters.

So I'm curious, you said you found this tenant thru a real estate agent. Did you have to pay that agent for this? If so they did a horrible job and you need to interview whomever is helping you (if you're going to still go thru a realtor or prop mgr).  I don't have a prop mgr but do get placement services and they are there from showing the property thru the move in inspection.

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