Tenant never moved in do I keep the deposit?

Question

Just wanted some insight on this. My tenenant became very needy, and began requesting weird things, (all new windows on house, deposit back, discount on first months rent) because the house was "Unlivable" with screen doors not offering security and old windows. Nothing was different from when she had seen it half a month ago.

We accomodates somewhat, and painted a couple doors she thought were "unacceptable" and fixed a few other things, and bought screen doors. Then she demanded deposit back and we mutually agreed to terminate the lease.

My question is should i keep the entire deposit, or only the portion related to items we fixed/doors we bought, as well as prorated rent for the first few days of the month. The security deposit portion of my lease is listed below. I dont want this to end up in a lawsuit i cant win. My lawyer has advised I should return only a portion based on what we had to do in repairs, in lieu of asking him again and paying ungodly rates, I wanted to see what this community thinks.

My lawyer says since we mutually ended the contract, this line does not apply any more...

The full term of the Agreement has been completed and proper notice has been given.

My main question is, should i keep the deposit and move on, dealing with any issues that come up? Or, return the portion that is the difference in all repairs and requests we accomodated, as per the lawyers advice?

Thanks

Nick

Kim Meredith Hampton · Answer

@Nick Vehr just s couple of points, hope this helps now and in the future:

On your application, does it state that once they are approved the holding deposit becomes a security deposit and is non refundable if they fail to move in? In addition, did she also sign the lease? Our lease also states that it is as-is unless noted and signed between both parties.

If it does state that in either, I could argue on a couple of points:

1. Make a claim on the deposit for the amount of time you now experienced vacancy because she failed to take occupancy

2. Give it back to her and lesson learned

Robert Gilstrap · Answer

@Mike Cumbie it would have never been called a security deposit in the first place if a professional PM was used but to your point if the property was rent ready and the tenant failed to move in then the money would go to the owner. I think I was more driving home the point that PM's bring a lot of hidden value in that we prevent things from happening that cost an owner money because we have the right documents/systems in place. Unfortunately for our profession it's extremely hard to sell people on "hidden savings" or things difficult to quantify. Same thing goes for real estate agents right? People tend to think you sit back and do nothing and collect a big commission. They never see how you prevent problems or keep a deal together behind the scenes.

Ross Denman · Answer

@Mike Cumbie while this is not a common occurrence, our office receives the security deposit at the lease signing. If the tenant were to not move in for whatever reason, we would attempt to leverage the tenant by letting them know that they had signed a legal contract and that they were obligated to honor their lease. If things were to escalate to where it would become a legal matter though, we would release tenant from the contract and return the SD then we would immediately put the home back on the market and reconnect with any other prospect who had previously expressed interest or applied for the home.

I can't speak for any other PM's, but I would hope that they would not keep the SD. If they did, I would hope that they would split that with the owner for the lost time by taking the home off of the market.

Phil Earley · Answer

@Mike Cumbie  It depends.  Who was responsible for the home not being move in ready in this situation?  If the property manager drops the ball, the deposit goes to the owner.  If the owner drops the ball, fee goes to the property manager.   We are all in this together and have responsibilities to each other at the end of the day.

Account Closed · Answer

Not worth the headache. I had the same situation.  Nice house to begin with but they demanding unrealistic things. We try to accommodate but decided to move on and return the deposit. Now the house is rented going on 2 years with different tenant and much nicer. Some people live in dream world. There is no such things as perfect home.

Lynn McGeein · Answer

I just wanted to add that your state's landlord/tenant laws usually have specific requirements for handling security deposits and the return requirements.  Usually, though, these include the right for you to withhold any part of the deposit and itemize to the current leaseholder for costs to relist/re-rent the unit and the length of time it takes to find a new, qualified applicant.  I do not think you have a right to charge for upgrades you made just based on their request as they did nothing to damage the property, but you should be able to charge for the time it takes to find a new qualified tenant and the costs involved in that process.  I'm not a lawyer, no legal advice, just how I would handle it if I didn't have the holding fee in my lease.  But I might be wrong as your property manager, if you hired one, should be able to explain how it's done in your state.

Mike Cumbie · Answer

Thanks for the clarification guys, much appreciated! One of those questions that make you wonder.

@Robert Gilstrap, @Ross Denman, @Phil Earley

Mike Cumbie · Answer

@Phil Earley and @Robert Gilstrap,

First let me say that I am fond of most property managers and believe they do bring value quite often. So I am not trying to be snarky, However in this case I would like to ask the following question:

If this happened and the property manager collect a security deposit. Would the owner get that deposit/reservation fee or would the property management company end up keeping it for services (finding the tenant/time spent/lease sign fee).

Just the impression by the posts is that in this specific case the property manager would have "saved him" and gotten him that deposit so he didn't have to return it. But if it just goes right to the PM then it really is a moot point for the owner.

Robert Gilstrap · Answer

Absolute textbook example of why hiring a professional property manager makes/saves you money. No offense to @Nick Vehr here at all but a professional property manager has the correct wording in their application legal disclaimer, the reservation deposit agreement and their lease so that a tenant who fails to move in wold absolutely forfeit any monies paid. No legal advice needed and by the way no painting doors or any other BS either.

Nick, chalk it up to an educational experience and move on. Revisit your documents to tighten up the language so this won't bite you next time.

Phil Earley · Answer

The security deposit should be called a non-refundable reservation fee once submitted to hold the property.   Once possession is taken, the fee becomes the security deposit.

These are the policies and procedures a strong management company brings to the table.  Collecting monies like this or getting the lease to stick is what we do for our clients everyday.

Tenant never moved in do I keep the deposit?

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