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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  • Will GastonPro Member
    Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
    9y

    @Tamir Alush Just my two cents, but I would be ready to pay the $3,000, however I would NOT settle. I would go to court and use this as a $3,000 learning opportunity. I am currently being sued by tenant and have already mentally "set aside" the money in the event that I lose the case. This has also helped reduce the situation from a stressful event to an educational experience.

    You will most likely lose, but why not gain some experience if you do? 

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  • Linda S.
    Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
    9y

    @Tamir Alush,

    Since you inherited the property, you likely have no proof of what it looked like what she moved in.     My best guess, it hasn't really changed any... stereotypical section 8 don't really rehab, they just do the minimum.     You bought it, and will be judged on the basis it was when you closed on the property, and I'm guessing nothing big has changed since you got the property, so on that basis alone, I don't think you have any case.      Strike 1- you didn't give proper notice.   Strike 2- you said it was for renovations--  it's not her job to renovate the property so you can get more $$.   Strike 3--  not paying interest on the security deposit (if state law requires it).    My mentor just told me he heard of a case, where the judge NAILED the landlord over not paying interest 0.78 to be precise, so security deposits IMO if nothing big is damaged and there's no proof, are worth more hassle than needed as far as giving them itemized lists.. if it's a legit problem and  you have proof, I'm all for it...     Right now, you're paying to learn a lesson... which sucks, but it's best to settle.    I'd offer to pay her the $2K or even go up to $2,200-- factor in the price/value of your time energy if it goes to court.., and humbly apologize to her for the problems.  

    IMO if you try and fight it, with a lack of proof, you're just increasing the lawyer bill $3K--> $5K+ that you'll have to pay for her, because (I don't know your state law, so this is just my opinion)  again-- according to the law, you are at fault, and she has proof of you not following the law in many cases.. just take it as a learning lesson, eat the extra $$  and move on to improving the house.  

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  • Matthew T.
    Investor · Springfield, MA · Member since 2010 · 276 posts · 84 votes
    9y

    @Tamir Alush I would have to agree with @Linda S..  At this point you need to make the best business decision for yourself and probably just make a deal to make it go away.  Without sufficient documentation to present your case you are fighting an uphill battle.  Besides lawyer fees the amount of time you will also have to put into it when you could be growing your business is a cost to you as well.  

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  • Tamir Alush
    OP
    Investor · Miami, FL · Member since 2015 · 4 posts · 2 votes
    9y

    Great feedback guys, really appreciate it -- the consensus is definitely that the law is on their side, and I do take it as a learning experience and will be sure to comply and properly notify tenants in the future. Thanks so much for all the help!

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  • Federico L.
    Investor · Orlando, FL · Member since 2017 · 51 posts · 10 votes
    9y

    @Tamir Alush take a look at "the FL law". I have it bookmarked and check it frequently.

    http://archive.flsenate.gov/Statutes/index.cfm?App...

    "(3)(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.

    (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.

    (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."

    I would settle and move on. This will only bring headaches. Think of it as an unexpected expense in the property you bought, the deal most likely is still solid. 

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  • Shaun Patterson
    Property Manager · West Palm Beach, FL · Member since 2012 · 296 posts · 143 votes
    9y
    Originally posted by @Tamir Alush:

    Great feedback guys, really appreciate it -- the consensus is definitely that the law is on their side, and I do take it as a learning experience and will be sure to comply and properly notify tenants in the future. Thanks so much for all the help!

     Hope you got this behind you and found some good tenants. 

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