Security deposits and early lease termination

9 Replies

Can a landlord request that the security deposit be forfeited if the renter requests to get out of the lease a month early?  I want to work with them but don't think I have anything in the lease that states that they lose a portion of the security deposit.  Or am I bound to the restrictions of the security deposit as only to be used for repairs over and above normal wear and tear?

They want to break their lease, you can negotiate anything you want or they are still obligated to the lease. I personally wouldn't bring the SD into this conversation, they owe one more rent payment, if I can fill the place one month early I'd let them out of the lease but if I can't fill it, they are still responsible. If they choose to leave no matter what... you can use the SD for damage, repairs and/or unpaid rent. Just be sure to document everything. And refer to your states Landlord/Tenant Law, I'm telling you what I would do based on MN and AZ law, I don't know anything about NY.

thanks for that response!  the property is in Michigan. 

I typically try and work with a tenant when they move out early for two reasons:

1.)  They are much more likely to leave the place in good shape (I actually tell them that if they leave it in decent shape I will not use the security deposit for unpaid rent).

2.)  I typically rent in small towns and having a good reputation is often what gets me additional renters

@Terry N. you might want to read this blog post that I wrote for future reference. 

Typically "forfeit" and "just keep" security deposits are no-nos. You have to use the SD for money owed (damages, rent owed, cleaning) and then send them accounting of that according to your state laws. Typically without something in your lease otherwise you have to diligently try and re-lease the property and you can't increase asking rent nor charge them for your time.

In Michigan the law allows you to accept one and a half months rent for a Security Deposit.  E.G. if rent is $500.00 a month the Security Deposit can't be any higher than $750.00 a month.  And you can charge for the first months rent upon move in.  So in actuality you are charging first months rent and the Security Deposit.

In Michigan, if a tenant is on a month to month lease agreement, they must give you a 30 day notice that they are leaving and it must be a full 30 days notice.  (This applies to the landlord as well).  Therefore, if the tenant wants to make March their last month with you, they would have had to issue you a written notice no later than February 28th.  This gives you a full 30 day notice  (The month of March)

This Security Deposit is used for damages and anything else the tenant may owe the landlord.  You don't know what is owed to you until the tenant actually moves out and you can analyze the rental home, water bills paid, etc. 

Once the tenant moves out, the landlord has 30 days to notify the tenant of why you kept their security deposit and 45 days to file the claim in court in order to keep it.  (If the tenant contests you keeping it, otherwise, you usually don't have to file in court.  The tenant already knows why they aren't getting back)

There is no law that says you can't return it or you must keep it.  That's up to you.  But if you do it for one, you will have to do it for all, or else face a discrimination lawsuit if anyone should find out.  

It's always best to stick to the rules of the contract.  It only cause you grief to try and bend the rules "Just this once".  This is a business.  We must treat it like one.

As far as letting the tenant out of the lease early.  Hey, great, that's okay.  I've done this several times during my landlord career.  Absolutely they can leave early, but they will still be responsible for the rent owed to the end of the term of their lease.  But if they needed to leave early, go for it!  The choice is theirs.

Nancy Neville

Originally posted by @Nancy Neville :

There is no law that says you can't return it or you must keep it.  That's up to you.  But if you do it for one, you will have to do it for all, or else face a discrimination lawsuit if anyone should find out.  

 This drives me nuts.  It is simply not true.  You can absolutely make individual determinations based on circumstances.  People who state this are almost always just trying to justify doing what they want to do (keep the money) rather than honestly concerned about liability.

Check with your attorney on this.

Richard there isn't a "Law" that states you must return it (no matter what) or Keep It (no matter what) but it must be determined by a Judge whether or not you get to keep it and not YOU.  

There is a "Law", however, that says you must return it UNLESS you have "Just cause" to keep it, but once again that is determined by a court of law and not YOU. 

Most tenants, however,  don't contest it when a Landlord keeps the Security Deposit, because they know why you kept it, but we still need to send the tenant an Itemized list of damages and money owed as to why we kept the Security Deposit and it must be sent in writing within so many day according to our state law.  (So once again if it was up to US to decide whether we keep it or not, we wouldn't need to send an Itemized List to the Tenant within so many days)  But once again, 9 times out of 10 a tenant won't contest it, so therefore, we don't have to go to court to get permission to keep it because the tenants don't contest it.  But if they do, we have to go to court.  

So I'm sorry if this makes you nuts, but this is the truth.....

Nancy Neville

Originally posted by @Nancy Neville :

Richard there isn't a "Law" that states you must return it (no matter what) or Keep It (no matter what) but it must be determined by a Judge whether or not you get to keep it and not YOU.  

There is a "Law", however, that says you must return it UNLESS you have "Just cause" to keep it, but once again that is determined by a court of law and not YOU. 

Most tenants, however,  don't contest it when a Landlord keeps the Security Deposit, because they know why you kept it, but we still need to send the tenant an Itemized list of damages and money owed as to why we kept the Security Deposit and it must be sent in writing within so many day according to our state law.  (So once again if it was up to US to decide whether we keep it or not, we wouldn't need to send an Itemized List to the Tenant within so many days)  But once again, 9 times out of 10 a tenant won't contest it, so therefore, we don't have to go to court to get permission to keep it because the tenants don't contest it.  But if they do, we have to go to court.  

So I'm sorry if this makes you nuts, but this is the truth.....

Nancy Neville

 All of that is true.  And absolutely irrelevant to the portion of your post that I quoted.

What drives me nuts is the "If you do something for one tenant you must do it for all" advice.  Which is, legally, simply false.

Originally posted by @Terry N. :

Can a landlord request that the security deposit be forfeited if the renter requests to get out of the lease a month early?  I want to work with them but don't think I have anything in the lease that states that they lose a portion of the security deposit.  Or am I bound to the restrictions of the security deposit as only to be used for repairs over and above normal wear and tear?

 I think you can do this, but word it differently.  Write up a termination agreement in which you both agree to a sum for terminating the lease early, in order to avoid court, etc.  Make that sum the amount of the security deposit.  And include that you agree to deduct this from the security deposit.  I'd also add, that there will be no further charges to the tenant, as long as they leave it in the same condition it was left in upon move-in, less normal wear and tear, and move out on the agreed-upon date.

You should still comply with any move-out inspection laws, and send them an itemization of deductions from the security deposit within the time allowed by your state.  Just itemize the agreed-upon amount which shows as deducted, and if there was any additional damage, include that.  Then it would be up to you to agree to waive any additional damage beyond the amount they "settled" for.

My thinking is this way, they don't just leave the place trashed.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.