Ok here's my scenario any help would be appreciated. I have a SFR in denver. I have a tennant set to move in 12/1 and she gave me a 1 month deposit.
After we signed the 1 year lease in mid November she said she was having some medical problems. Then just yesterday she said she lost her job (property management) and said now she can't afford to move in (no savings). I thanked her for being up front before movinhg in. She wants her full deposit back because denver is a hot rental market and I can likely re-lease it again shortly (which is true). Sounds easy, just keep the deposit and rent it out again correct? However, she said if I dont give the deposit back then she will move in then I can go through the eviction process to kick her out (remember she is a property manager). If I go through the process I will likely lose a couple months of rent ($1,500 per month) and incur legal costs that will likely exceed the 1 month deposit. I was thinking of asking for a fee ($500?) to break the lease and not let her move in. Why have someone move in who cant afford the rent. Thoughts?
Thanks so much
She sounds like a trouble maker. I would just give her the deposit back and move on.
I would try to negotiate to keep part of the deposit, you stopped advertising, so she certainly has some responsibility. She's probably bluffing about moving in, and if she's lost her job then you don't want her to anyway. Did you give her a deposit receipt, does it state the deposit in non-refundable? If you think you can rent it to someone else quickly, then I probably wouldn't push her too hard, not worth the headaches, just try to negotiate what you can, and move on.
I'd agree you can probably get a new tenant by 12/1, so I would just give them money back, put your ads back up and take a new tenant rather than fight this battle.
You certainly should not lose two months to an eviction, though. And it can be done for under $500. You should know about these guys: http://www.thslawfirm.com/
When in a situation like this, here's my process. For one, signing a lease, for me, means we both sign, then tenant hands over cash or money order for the deposit plus one months rent, and I hand over the keys. They now have possession of the place. If the place is vacant, I'll often do that a few days before the lease is supposed to start and put a note in the lease saying those days are free.
If I'm willing to hold a place for a tenant to move in later, which I won't do in our market for more than a week or so, then I require a holding deposit equal to the deposit. The tenant hands of the cash or MO and signs a form that says "NONREFUNDABLE" in big letters multiple times. If they sign the lease by the agreed-upon date, the holding deposit becomes the security deposit. If not, I keep it and resume marketing the property.
I agree with @Jon Holdman, this isn't worth it. This tenant knows the system and I suspect is selling you a line here. Whatever her reasons for wanting out, she is out. Better to focus on the next tenant and get them moved in.
What does the contract say , did she sign a non-refundable deposit document, if not I would start advertising immediately and if you get a 12/1 tenant she gets it all back. Unless she has signed a non-refundable fee document you are not on solid ground keeping it and she is a savvy tenant. You might just be better giving it back to start with but I would be inclined to be more formal then just handing it back so you have all your ducks in a row with this kind of tenant. Mid November is that like a week ago? definitely don't keep it.
@Dan McDougall - how is she going to move in without the keys? How is she going to get the keys without Dec rent? It takes me an average of about 20 hours from notice of tenant moving out to giving the keys to a new tenant. Doing that twice in one month is not my idea of something I would want to do for free. My time is worth something.
If she has the keys without Dec rent then shame on you and give her full deposit back and chalk it up to education.
In your position (that I first assumed with her not having keys), I would offer her half her deposit back, if you are able to re-rent with no lost rent. If not, she is on the hook for rent and utilities until it's re-rented as well as your time to re-rent. Put it all in writing for her to sign. If she won't go that route then tell her you will settle up in court.
BTW this time of year and this time of the month it might be a bit hard to find a suitable tenant for Dec 1. Most good tenants have taken care of business by this time of the month. Screen carefully.
All of that said, returning the full deposit would certainly be the lowest emotional cost approach.
I do a non-refundable "holding fee". Notice that it is not a "deposit". The person has not paid the rent nor do they have the keys. So if they back out the holding fee is kept and they move on.
I'd have to see your paperwork but based only on what you've said, I'd say you are entitled to keep it even if you do find a replacement right away. But I also agree with the others that if it's that easy to find a replacement I'd be inclined to stick to my formal process and when I filled it I'd return the deposit.
Thanks for all the excellent advise! I typically give keys upon receipt of the first months rent and a walk through inspection (typially a day before move in). My mistake in this case was taking a deposit seperately (from 1st month rent and giving them the keys) and well before the move in date. Also I need to beef up my lease to clearly state that the deposit is non-refundable. As noted by the BP members I should have called it a non-refundable holding fee and not a deposit.
Great ideas for the Non Refundable holding deposit/fee and need for renter to sign a deposit document clearly notating that it non-refundable.
@Jon Holdman thanks for the eviction firm referral, I really appreciate it.
What I don't get is why don't you change the locks. Then she will not have keys to the house. If you have not collected the first months rent she will not have a right to move in and it becomes a civil matter. (I would be changing the locks any way at this point)
Of course if she breaks into the house, the police may not arrest her. Then you have to get the eviction. And returning her deposit at this point would be cheaper
Always best to gauge if you are really going to loose money. Remember in a court of law it is not always about fair or what your contract reads. It may come down to a judge that says you didn't lose any money.
Tell her that you will prorate the amount based on when a new tenant moves in.
@Dan McDougall You pretty much answered your own question in your first post, and got a lot of thoughtful responses as well. It's not worth the brain damage when you can re-rent easily. Use it to learn, adjust your processes, and move on. What you're legally entitled to and what is best practice in reality are frequently different.
How much time have you wasted thinking about this already? Have her sign a release about not moving in, etc & give ALL the money back.
If you have given her keys, change the locks immediately.
Two things that my mentor taught me about real estate. Answer your phone & WRITE THE CHECK. In your case, give the money back. It is not worth the headache.
Maybe "property manager" should be added to the list of jobs that are automatically declined :). What say you @Rob K. ? Rob has a list of jobs that are automatically declined, hence the reference.
Originally posted by @Steve Babiak :
Maybe "property manager" should be added to the list of jobs that are automatically declined :). What say you @Rob K ? Rob has a list of jobs that are automatically declined, hence the reference.
I currently have a tenant who used to be a property manager and she's excellent. Rent is on time and house is kept up nice.
As far as the process, I do exactly what Dawn does. I take a non refundable holding fee and the lease and keys are taken care of at the same time as the rest of the money changes hands. I read on here sometimes about landlords signing a lease before the lease starts and before the tenant moves in. I don't see the point in doing it that way.
I would do as many have state already- get the house re-rented and maybe negotiate a hundred bucks or so for lock change/pain and suffering. I need to make a point, though especially since you are dealing with a property manager. There is no such thing as a non-refundable deposit! A fee is non-refundable. Deposit, by definition, means refundable. Like @Dawn A. states, "a non-refundable fee". Mine then converts to and becomes part of the move-in monies at that time. No move-in for any reason and the holding fee is forfeited.
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