Security deposit for Inherited Tenant

9 Replies

Hi,

I was wondering what the process is when you buy a property with tenants already in the property.

When the property is sold to you, do you also inherit the security deposit the tenants deposited? or is that not the case?

Thank you!

Yes, you need to make sure you get the security deposit in the transfer of ownership.

You should get a credit from the seller for security deposits.  You should also get a credit for partial month rents.

Ideally you would also get estopple letters signed by both the seller and the tenants.  These would outline the terms of the leases - end dates, rent, late fees, security deposits, etc.

@Anthony Hurlb - Thank you! I thought that would make sense as well!

@Jon Holdman - Thank you Jon! this is great information for the future.

The deposit and prorated rent is yours. I recently received a $1500 discount on the purchase price of a property I purchased that closing the beginning of October. $750 for security deposit and $750 for October’s rent. (The tenant had already paid the seller their October rent)

@Mark Wurtemberg - when do you disclose that information as a seller? When the offer is made to the property? Or at closing?

@Jonathan Park typically it's within your disclosure period. The seller should disclose these items, but if you plan on remodeling the property and getting new tenants, you may not care about the estoppel. Still nice to have in case you want to do cash for keys though. I know we have offered to provide the entire security deposit returned to the tenant pending they move out by x date. You would be amazed how quickly people are willing to move with that knowledge that they could get all of their money back. 

As a side question,

The 4plex I live in recently got sold. The new owners are remodeling the units as tenants move out. If say I move out, and I've kept the unit in great condition, how will this affect the deposit I receive back? Especially if they are going to tear everything out anyways.. thanks in advance.

Originally posted by @Alex W. :

As a side question,

The 4plex I live in recently got sold. The new owners are remodeling the units as tenants move out. If say I move out, and I've kept the unit in great condition, how will this affect the deposit I receive back? Especially if they are going to tear everything out anyways.. thanks in advance.

 If you move out and leave the property the same way you found it at the beginning of your lease, I don't see why you shouldn't get your full deposit back, especially if you stayed current with your rent. 

@Jonathan Park .....I agree with @Kristina Heimstaedt (Smile) ....From the buyer's side, I have learned that sellers don't know, or often think, that the deposit is due to the buyer at time of closing. So I like to make sure my offer is excepted prior to confirming this with the seller. This is to potentially avoid the seller rolling in the deposit amount into the purchase price thus paying more for the property. All sellers I have worked with upon learning this have discounted the purchase amount equal to the deposit and prorated rent at closing. 

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