Being sued for security deposit

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Being sued for security deposit

Tamir Alush
Investor · Miami, FL · Member since 2015 · 4 posts · 2 votes

I bought a small multi-family about a year ago and inherited a terrible section 8 tenant who constantly complained to Housing dept. about every little thing and made my life hell... Her lease wasn't extended and she vacated the apartment. Upon inspection, I found several issues which didn't allow me to give the security deposit back (after all she lived there for several years with children). 

I wasn't aware of the statutes that set the proper way I'm supposed to notify tenants of withholding security deposits, so I just let her know that I'm going to use these funds towards renovation of the unit via text message, and after the 30-day period allowed by law.

A few months went by, and she now hired an attorney and is suing me at small claims court for the security deposit. Naturally I'm more than willing to pay the security deposit back just to get past this and move on with my life, as this is not really worth fighting over, however the attorney is asking $1,500 in legal fees so the total amount they're willing to settle without going to court is just below $3,000. I've tried negotiating this figure down with no success. I've made three offered and they didn't even counter -- just rejected them. Per my understanding, they're well aware of the technicality for not notifying tenant on time and are basically "playing their position" and taking an aggressive position.

What would you do in such a case? I've heard that small claim courts always try to push for mediation before going before a judge, which is something I can use to my advantage, because they haven't budged at all in negotiations, however it is my understanding that the requested $1,500 in legal fees might go up if we don't settle prior to.

One more thing that is noteworthy is that they sued the management company (which I own) and not me directly (the property is under my name) and if this continues to trial they will need to re-submit the lawsuit. Perhaps this is something I can play to my advantage.

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Eric F.
Real Estate Investor · Raleigh, NC · Member since 2012 · 427 posts · 297 votes
9y

Honestly, I would probably pay the 3k (actually I for sure would). 1) You did not notify them in the 30 days, which is a requirement, so you are already in the wrong. 2) You probably don't have before pictures. 3) Did you have the deposit in a separate account only for security deposits? Did you notify the tenant as to where the deposit was being held? 

4) You said you are using the funds towards a renovation of the unit in a text. Not repairs. Renovation. The tenant doesn't pay for renovations out of their deposit, only damage and repairs. Did you send an itemized list of repairs via text? I doubt it.

Basically, there is a much larger chance you lose than win.  And if you lose, 3k is probably the floor of what you will have to pay. This $3,000 is your fee for learning the legal requirements of being a landlord. If you want to be positive about it then realize you could have lost a lot more before being motivated to read the statutes around your chosen profession.

PS it blows my mind how many people here conduct these conversations by text message as @Mindy Jensen said. I know it is 2017, but a text message is not formal communication. If you are keeping over a thousand dollars of someone's money, you need to use more than 250 characters to let them know. 

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  • Jon W.
    Investor · Matamoras, PA · Member since 2015 · 111 posts · 32 votes
    9y

    it sounds like the case it depending on what the judge decides. i would bring as many photographs of the damage to the property and costs of repair.

    0Reply
  • Dan MackinBusiness Member
    Real Estate Agent · Erie, CO · Member since 2014 · 1k+ posts · 512 votes
    9y

    Here are my comments from what happened when I was a tenant years ago and had to go to court with my landlord. We as the tenants won the majority so here are my tips to make it better for you as the landlord.

    1. Have physical proof of the before and after.

    2. Don't get emotional. 

    3. Be very organized. Our landlord brought a ton of paperwork, but he wasn't organized. If he was we likely would have lost.

    4. Have very specific points to bring up to the judge. They don't want you to waste their time. Just talk about the items you're fighting with the tenant about.

    Hope these are at least a little helpful.

    Good luck!

    720-466-3378
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  • Dale Walker
    Investor · Rigby, ID · Member since 2016 · 52 posts · 45 votes
    9y

    @Tamir Alush

    First off, get familiar with the requirements for the state you have the property in. Many states require that a landlord send the deposit back within 30 days or a list of damages which justify why they didn't get their property back. Inheriting tenants never is good when it comes to deposit returns. You may not have the evidence of what the place looked like before they moved in and so if they take you to court, you will need to prove they did the damage. You often times cannot prove it. That means you loose. Next, many states have a penalty for not giving the deposit back or a list of damages within the 30 days. The penalty varies by state. Some states penalize the landlord 3 times the amount of the deposit. It does not matter if you can prove damages, they will win 3 times the deposit because notice was not sent. When I inherit a tenant, I do not hold their deposit if I cannot prove they did the damage.  I think you will be responsible for the return of the deposit and possibly ALL the lawyer fees if the state is tenant friendly. Good Luck.

    2Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    9y

    @Tamir Alush , I hate to say it, but I think @Dale Walker  is 100% correct. 

    States dictate that deposits must be returned in full - or notice given as to how the deposit was used (past tense - you have to do all the repairs and have receipts ready to share with the tenant) before a certain date or the landlord may be held liable for up to three times damages, which equals three times the deposit.

    This prevents landlords from keeping the deposit forever, but it can also come back to bite you if you don't know the laws.

    I agree with @Dan Mackin , take all the documentation you can and be very organized about it. Post-it notes are your friend! But also mentally prepare yourself to pay them 3 times whatever the security deposit was. 

    This is an expensive lesson learned. Also note, text message is not always a legal method of notification. A letter sent by USPS is always recognized as legal notice.

    [email protected]Podcast Guest on Show #261
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  • Penny ClarkPro Member
    Sacramento, CA · Member since 2014 · 513 posts · 319 votes
    9y

    @Tamir Alush, If you have pics of before tenant moved in, that would help your case. However, since you didn't mention it, I'm assuming the previous landlord provided little or no documentation when you purchased the property. Consider this a lesson learned and be prepared to pay up. In Cali, which is a very tenant friendly state, you must return the security deposit to tenant within 21 days with copies of receipts showing repairs done in order to take the deduction. If you fail to do so and tenant contests it, landlords can face not only returning the full deposit (no matter what condition it is in) and paying any legal costs associated with it. The judge may also impose a steep fine on the landlord. The judge is almost always on the side of the tenant because it is assumed that the tenant is uninformed in matters of the law.

    Bottom line is learn the laws in your state - better than your tenants and understand your landlord rights. Most tenant disputes that end up in court revolve around the security deposit.

    Also, when purchasing a property with inherited tenants, assume the current owner didn't do anything right and get as much documentation as you can on the tenants ( inspection reports, current contact information, payment history, etc.) prior to closing. If you have nothing and still wish to purchase the property, assume the worst and have a fund set aside in case you need to start the eviction process.

    Let us know how it goes!

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  • Eric F.
    Real Estate Investor · Raleigh, NC · Member since 2012 · 427 posts · 297 votes
    9y

    Honestly, I would probably pay the 3k (actually I for sure would). 1) You did not notify them in the 30 days, which is a requirement, so you are already in the wrong. 2) You probably don't have before pictures. 3) Did you have the deposit in a separate account only for security deposits? Did you notify the tenant as to where the deposit was being held? 

    4) You said you are using the funds towards a renovation of the unit in a text. Not repairs. Renovation. The tenant doesn't pay for renovations out of their deposit, only damage and repairs. Did you send an itemized list of repairs via text? I doubt it.

    Basically, there is a much larger chance you lose than win.  And if you lose, 3k is probably the floor of what you will have to pay. This $3,000 is your fee for learning the legal requirements of being a landlord. If you want to be positive about it then realize you could have lost a lot more before being motivated to read the statutes around your chosen profession.

    PS it blows my mind how many people here conduct these conversations by text message as @Mindy Jensen said. I know it is 2017, but a text message is not formal communication. If you are keeping over a thousand dollars of someone's money, you need to use more than 250 characters to let them know. 

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  • Patrick Anibaldi
    Temecula, CA · Member since 2016 · 75 posts · 38 votes
    9y

    Ask her via text to settle out of court for $2000. This way she gets more than the $1500 and the lawyer fee goes away saving you $1000. (I am not a lawyer)

    1Reply
  • Nicole A.Pro Member
    Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
    9y

    Hi @Tamir Alush. Definitely get to know all of your area's landlord laws. Unfortunately, you are learning about the security deposit aspect the hard way at this point.

    As mentioned already, you say you were going to use the funds towards "renovations." As you now know, that is very different than "repairs." Being that the tenant(s) lived there for a few years, you will have to expect some wear and tear such as needing to paint the walls, clean carpets (or possibly replace them depending on age), etc. Damage would be large holes in the walls, broken doors, broken faucets....basically items that were clearly broken due to harsh and/or improper use.

    They want just under $3,000....what did you offer the 3 times you were rejected?

    0Reply
  • Nicole A.Pro Member
    Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
    9y

    I have to laugh seeing @Patrick Anibaldi's advice to text directly after @Eric F.'s post reiterating that communication via text is not exactly professional (nor is it always considered proper communication/notice in court). So, please communicate via mail or at least email. Or, if you've been talking via text, continue, but consider it verbal. Follow up/confirm agreements in proper writing. Not text.

    0Reply
  • Bernie NeyerPro Member
    Investor · Chanute, KS · Member since 2016 · 155 posts · 60 votes
    9y

    First, let me point something out. In small claims you are barred from using an attorney. You may consult one, but his fees are not usually recoverable. Make sure it is Small Claims and not a Limited Action, where you can use an attorney, but there are limits on what the award can be, usually about $10K to $15K, but states can differ. The case number will usually start with SC for Small Claims. It might look like SC1234-2017.

    If it is small claims she can only claim the actual loss and not punative the damages which are what the treble awards are. Once again, make sure it is Small Claims. In the perimeters of a Limited Action, I'm not sure you can claim punative damages there either.

    For the uninitiated, Punative Damages is a fine assessed by the magistrate and awarded to the plaintiff to teach the offender a lesson. When you hear of these huge awards in court, usually they consist of Punative Damages.

    When fighting the case you don't need before pictures, despite what is written above. The manager/owner if available can appear as a witness on your behalf and testify as to the condition of the premises at the time it was rented. After pictures are your ace in the hole. The more the merrier and they can actually cause the plaintiff to drop a case.

    Your issue as I see it is the timing of your notification as to the resolution or return of the tenant's deposit. This time actually starts when you take control of the property. I had a Sec8 tenant that didn't surrender the premises until a week after she was supposed to have vacated it. If I were

    you, I'd think real hard as to when you took control of the premises. 

    Your second problem is how you notified the tenant. You can always notify them any old way, but ALWAYS send them a written letter too and put a copy in the tenant's file. For about a dollar, you can get evidence of mailing the letter from the USPS and a buck more get notice that thd mailman dropped it in their box.

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  • Nicole A.Pro Member
    Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
    9y

    @Bernie Neyer I think the point about having an attorney in small claims varies state by state.

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y

    @Bernie Neyer  While your answer is very detailed, your information is based on Kansas law and may/does not apply to other states

    @Tamir Alush

    If I were you, I would settle this prior to court.  A brief search of Florida law in regard to deposit refunds suggests any of your claim to the deposit is moot as you failed to properly account for damages prior to the deadline required.  Additionally, you could be responsible for triple damages.  Her is a link to which failure to account for a security deposit was deemed civil theft

    https://browardlandlord.wordpress.com/2011/10/12/f...

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  • Bernie NeyerPro Member
    Investor · Chanute, KS · Member since 2016 · 155 posts · 60 votes
    9y

    I'm not an attorney, but to my knowledge, no. The whole concept of Small Claims is that you don't have to have an attorney to litigate, nor defend yourself. The courts interpret that as you don't get to have an attorney at trial. Now, he may sit in the gallery, but if he is communicating with you, the magistrate can expel him from the court room. If one party brings an attorney, and the other doesn't that sets them at a disadvantage. Usually in Small Claims, the court holds the hands of the litigants so to speak. In Limited Actions, that is different. You can have an attorney, but I've seen some appear Pro se.

    What may differ by state is the plaintiff's ability to collect more than just damages and more than purely money. In a regular action you can lay claim to non monetary items to be sold at auction to retire the debt incurred by the defendant at trial. O.J. Simpson is a case in point. The items he was trying to secure at gun point in Vegas were seized in relation to the trial for wrongful death he had lost.

    Here in Kansas, and surrounding states, you can only seize money. You can't seize personal items to secure the debt. You can only sue for actual damages and in Kansas the limit is $4K.

    What I didn't mention previously is that if you are an LLC you have to have an attorney. You can't appear Pro se, so in that one case, you can have an attorney. This is because of the masking a company does for its share holders. Your LLC may only have a single share holder, yourself, but the courts don't know this and so require you to have an attorney so that all of the share holders are represented.

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y

    @Bernie Neyer

    A quick Google search reveals you can have an Attorney in Florida.  Additionally, NOLO indicates that only California, Michigan and Nebraska prohibit lawyers

    I did not look up Kansas specifically but your "you can only seize money" statement again may only be true of Kansas.  Landlords in most states have a difficult time collecting judgements as most tenants lack attachable assets.  In Texas it is almost impossible to collect on a judgement against a tenant.  The difference here is the OP DOES have an attachable asset so the former tenant will collect at some point

    1Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    9y

    @Bernie Neyer

    Hi Bernie, this statement:

     First, let me point something out. In small claims you are barred from using an attorney. You may consult one, but his fees are not usually recoverable.

    and some of the other implications in your post regarding different states are simply not correct for every state. 

    I am a mediator in MA small claims court, have seen a number of landlord tenant issues where people routinely use attorneys and magistrates allow for fee recovery. It is not mandated, but it is not banned. This is true even in mediation where attorneys are allowed.

    The magistrate has a great deal of discretion in MA small claims (which go up to $10,000) but I have never seen them bar an attorney from court.

    1Reply
  • Patrick Anibaldi
    Temecula, CA · Member since 2016 · 75 posts · 38 votes
    9y

    @Nicole W. glad I could make you smile!!! :) I think professional is kinda out the window at this point. The name of the game now is minimizing losses and getting out as painlessly as possible. 

    0Reply
  • Bernie NeyerPro Member
    Investor · Chanute, KS · Member since 2016 · 155 posts · 60 votes
    9y

    i stated previously that Small Claims vary by state, but most do not allow attorneys as the whole concept of Small Claims is to not need an attorney.

    As far as judgements, that certainly will vary by state. It wasn't that long ago that Kansas had a $2K limit. The problem I run into now days are expenses that exceed a recoverable amount in Small Claims.

    Now when it comes to mediation, everything is out the window. They can and will do anything they want. Usually though mediation is for larger amounts and the litigants are trying to avoid legal cost as that can eat up a judgement.

    As for the original case, which is what we should be discussing here, they said it was Small Claims. Usually in you can only get actual losses and not punative damages, which is what treble awards are.

    If you Google it, I'd bet you could easily find online your state's statutes and a detailed, user friendly explanation as to what is or is not allowed. 

    0Reply
  • Bernie NeyerPro Member
    Investor · Chanute, KS · Member since 2016 · 155 posts · 60 votes
    9y

    In reference to Greg above, I'm holding a filing for Kansas and it says differently. 

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y

    @Bernie Neyer

    Here are the rules for Kansas where lawyers are allowed if the other party has a lwayer:

    http://www.nolo.com/legal-encyclopedia/kansas-smal...

    As I stated previously. only 3 states do not allow lawyers at all.  

    0Reply
  • Shaun Patterson
    Property Manager · West Palm Beach, FL · Member since 2012 · 296 posts · 143 votes
    9y

    @Tamir Alush can you explain the process of events that went down. I assume that she gave you notice of her new address 7 days prior to move out. You then did a walk through with her and found all the issues with the unit. Then you texted her and told her that you held the deposit to cover the expenses for putting the unit back in rentable condition. She then got mad googled how to get her SD money back and went to a lawyer and told them what had happened. now your in this situation. That's step one. If what i said is true then give back the SD and sue her in small claims court. Per statues you have to give back the money but that doesn't stop you from suing her for damages. I hope you have before and after pictures. or at least the move in and move out inspections. With this in have a upper hand in this situation.  Since she may win this battle but you will win the war since she will have to have this judgement on her record for the damage she made to the property on her credit report and you can at least get back the 1500 from her (half what you spent). Regarding the texting of the lawyer. They might have an agreement stating that any negotiations will come through them. especially if this guy is doing this for free. Regarding the Pm company she can sue the company since you are acting as an agent for the owner. And it was the Pm companies mistake that caused this to happen. Even though it's one in the same. 

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  • Bernie NeyerPro Member
    Investor · Chanute, KS · Member since 2016 · 155 posts · 60 votes
    9y

    Greg,

    I don't care what NOLO says. I have the filing papers in my hand right now and it says differently.

    I have litigated 10 Small Claims cases and have spoken extensively with an attorney who happened to be an aquantence. Right on the paper it says you can only collect filing fees and actual damages. I tried to collect attorney consultation fees and the Magistrate wouldn't allow it. Once I won the case I was allowed to assess certain collection costs.

    I have been in 4 different county courts appearing in front of 5 different Magistrates. They all handled the litigation differently. 

    None of this pissing contest is helping answer the original question, so ignore EVERYTHING on this thread as no one knows what they are talking about. Go counsult an attorney. Most will spend the first 15 to 30 minutes with you for little to nothing.

    0Reply
  • Arthur Brenneman
    Flipper · Fleetwood, PA · Member since 2017 · 4 posts · 1 vote
    9y

    One thing to watch if they are suing your LLC is that you can represent your LLC in court. Some states you need to have a lawyer represent your LLC in court.

    0Reply
  • Jon Pitcher
    Property Manager · Oklahoma City, OK · Member since 2016 · 87 posts · 69 votes
    9y

    Talk to a local attorney.  I'm not licensed in Florida, so no legal advice here... but as others have pointed out, you botched the procedure so it likely doesn't even matter if you are right on the merits.  I would definitely lean toward settlement if you haven't followed the law with respect to how you held the deposit funds.  Better to settle and have the case dismissed than to have a judgment against you on the record, and potentially face additional penalties for misappropriating the security deposit.

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  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    9y

    @Tamir Alush Make a quick call to an eviction attorney. They will be able to tell you within their preliminary consultation if you have a leg to stand on fighting this or if you have to lay down and pay. I'm figuring despite any other factors, since you didn't follow the law to the T, you've gotta pay. And you can pay now 100% of the security deposit and a little bit of attorney fees, or more % of the security deposit and a multiple of attorney fees after they file a ton of motions and reach discovery later. 

    After you get confirmation from an attorney who works with landlords (like an eviction attorney) that you made a mistake, and understand what the limits of the law are as to damages (like how many multiples of the security deposit are potentially due, interest, and/or attorney fees), make a quick offer and be prepared to pay the full amount they demand if its less than they'll win in court.

    Many states and municipalities strictly interpret notification timelines and methods, ie if you don't give notification exactly as described in the law, in the proper timeframe, by the proper method, its like you didn't give any notification. So this is more of a case of minimizing your damages vs. coming out ahead.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    @Tamir Alush

    They have the law on their side. 
    Here are parts of Chapter 83 part II:

    (a) Upon the vacating of the premises for termination of the lease, if the landlord does not intend to impose a claim on the security deposit, the landlord shall have 15 days to return the security deposit together with interest if otherwise required, or the landlord shall have 30 days to give the tenant written notice by certified mail to the tenant’s last known mailing address of his or her intention to impose a claim on the deposit and the reason for imposing the claim. The notice shall contain a statement in substantially the following form:This is a notice of my intention to impose a claim for damages in the amount of upon your security deposit, due to . It is sent to you as required by s. 83.49(3), Florida Statutes. You are hereby notified that you must object in writing to this deduction from your security deposit within 15 days from the time you receive this notice or I will be authorized to deduct my claim from your security deposit. Your objection must be sent to (landlord’s address) .If the landlord fails to give the required notice within the 30-day period, he or she forfeits the right to impose a claim upon the security deposit and may not seek a setoff against the deposit but may file an action for damages after return of the deposit.

    (b) Unless the tenant objects to the imposition of the landlord’s claim or the amount thereof within 15 days after receipt of the landlord’s notice of intention to impose a claim, the landlord may then deduct the amount of his or her claim and shall remit the balance of the deposit to the tenant within 30 days after the date of the notice of intention to impose a claim for damages. The failure of the tenant to make a timely objection does not waive any rights of the tenant to seek damages in a separate action.

    (c) If either party institutes an action in a court of competent jurisdiction to adjudicate the party’s right to the security deposit, the prevailing party is entitled to receive his or her court costs plus a reasonable fee for his or her attorney. The court shall advance the cause on the calendar.

    (5) Except when otherwise provided by the terms of a written lease, any tenant who vacates or abandons the premises prior to the expiration of the term specified in the written lease, or any tenant who vacates or abandons premises which are the subject of a tenancy from week to week, month to month, quarter to quarter, or year to year, shall give at least 7 days’ written notice by certified mail or personal delivery to the landlord prior to vacating or abandoning the premises which notice shall include the address where the tenant may be reached. Failure to give such notice shall relieve the landlord of the notice requirement of paragraph (3)(a) but shall not waive any right the tenant may have to the security deposit or any part of it.

    Therefore, if you failed to make a legal claim the law is on their side. Pay them now before they incur more attorneys fees.--that is my opinion!

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