Tenants wanting to keep security deposit for last months rent?

10 Replies

What does everybody do on tenants that insist on using the security deposit for the last months rent of the lease?

I have some tenants that are moving out of state, and while I am happy for them. They are moving out on December 4th, lease ends on January 1st. Last rent payment is due on December 1st. They want to use the security deposit for the December 1st payment.

Contractually, this is obviously in violation of the lease. They have been decent tenants, and I don't expect the place trashed, however, anything can happen.

I really only have two options

1. Hold to the contract, and say rent is due on December 1st, and security deposit will be returned after move out. If they don't pay then proceed with eviction.

2.  Schedule a walk through close to the time, they are moving out, and ensure there are no huge issues that I would be taking out of the security deposit and if not hold the security deposit for the last month.

Thoughts?

Did not give in if you have damages then you will be chasing the money

Do your inspection before the end of November and let them know the cost of damage repairs. Have them pay any difference to cover the cost to top up on December 1st to insure there is enough to cover rent and damage.

I would let the tenants know that it doesn't work that way...

The security deposit is held in a trust account and can't be used prematurely.

Since they didn't pay last month's rent in advance, they need to pay December rent when it is due. They are contractually obligated to do so. Since they have been great tenant's thus far, it would be in their best interest to not breach the rental agreement at this point.

After possession of the unit has been returned to you, then you will do your final accounting and refund any monies due back to them from their security deposit. Note, you need to allow time for make sure they have paid their final utility bills too, to prevent liens against your property.

In our book, security deposit goes toward paying for damages first, unpaid utilities second, unpaid fees third, and lastly for unpaid rent. If you release the security deposit prematurely and the tenant owes you for anything, you'll be at risk for not getting paid. But of course you know that. Stand firm and fair.

Let them know that according to the lease the damage deposit is just that, the damage deposit.

Give them a list of all the items they need to clean, remove, etc prior to giving the property back to you.

The deposit ensures that they clean the property, including ceiling fans, inside of cabinets, and also that they remove all trash and personal items from the property.  

Even if they have been great tenants, sometimes people done anticipate the amount of time it takes to clean and move everything out.

You need to be firm and charge them a late fee if they decide to not to pay the rent. 

A contract is a contract. 

Don’t cave. You have a set of principles that have gotten you to where you are. An exception here or there will lead to more in the future. Might sound heartless but it’s what separates a mom and pop landlord from a professional, in my opinion anyway.

@Gabe G. , Tell them that per the lease they signed, the security deposit cannot be used for the last month's rent. Encourage them to pay the rent due on December 1 by reminding them that if it is not received by (whenever your lease states) that you will be forced to start eviction proceedings, and you really don't want to do that. 

I like the suggestion that you do a walk through in November, to give them an idea of what you will be deducting, if anything, from their security deposit. If you do this, make sure they know that you will be conducting a FINAL walk through, that this walkthrough is a courtesy, and they are not permitted to do any repair work (if it needs any) on the property without your permission, etc.

Keep in mind that they are moving out of state. If you insist they still pay December rent and they do not pay chasing them will be difficult and you will still have the deposit to deal with. If your state does not allow the deposit to be used against rent owed and the tenant demands it be returned you will have to chase them for December rent. A letter of agreement to top up and use the deposit for December may be your safest approach although legally not correct.

Keep in mind you're not just doing this for yourself, you're doing it for US!!! Tenants who use security for last month want to do it again and again. Refusing is like a vaccine that gives the herd immunity, they'll stop thinking they have a right to do it if no one ever lets them or anyone they know. In NJ it's illegal to collect last month at signing, max total deposit allowed is 1.5 months, so holding firm is imperative.

Absolutely agree with you Marcia.
No one wants to chase tenant for any unpaid bills later. Be firm on this point.

Originally posted by @Marcia Maynard :

I would let the tenants know that it doesn't work that way...

The security deposit is held in a trust account and can't be used prematurely.

Since they didn't pay last month's rent in advance, they need to pay December rent when it is due. They are contractually obligated to do so. Since they have been great tenant's thus far, it would be in their best interest to not breach the rental agreement at this point.

After possession of the unit has been returned to you, then you will do your final accounting and refund any monies due back to them from their security deposit. Note, you need to allow time for make sure they have paid their final utility bills too, to prevent liens against your property.

In our book, security deposit goes toward paying for damages first, unpaid utilities second, unpaid fees third, and lastly for unpaid rent. If you release the security deposit prematurely and the tenant owes you for anything, you'll be at risk for not getting paid. But of course you know that. Stand firm and fair.

I agree with everyone else. Stay firm, remind them what the lease says, what the purpose of a security deposit is, etc.

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