Tenant can pay rent but not deposit

6 Replies

Hi, I'm new to landlording but thanks to BP I think I have a pretty good handle on the basics. What this situation is though, is somewhat unique. Here's the story:

So I purchased this property with 3 tenants already in place and one unit vacant which was great because it's an FHA loan so I am occupying one unit. The property overall is in pretty bad shape with lots of deferred maintenance and very aged and damaged interior. Two of the current tenants are okay and pay their rent on time and have fully paid deposits but the last tenant is a first time renting couple who moved in July and has a one year lease in place. The catch is that the old landlords allowed them to make payments on their deposit which I only found out at closing when there was no deposit for that unit. Turns out the old landlord had never bothered to collect any of the payments on the deposit since the place was under contract and it was up to me to collect back payments and future payments on that deposit. The term was 5 months at $200 a month to cover the $1000 deposit. So far no payments have been made and I told them clearly up front when I took over that the whole deposit would be due on the first of December.

This month they informed me that not only would they not be able to make this month's rent they also would not have the deposit. They have since scratched up enough money for rent but not enough to cover the deposit that is currently due in it's entirety. As with most tenants there is no way they will be able to pay the deposit and still make their next month's rent. 

So the question is do I accept this month's rent and simply forget about the deposit or possibly file an extension for their deposit payment? Since the units are pretty trashed I am renovating all of them so even if they trash the place I will be doing repairs anyway. I would prefer not to have to go through with evicting them since I am already in the middle of renovating the unit I'm living in and having a turnover right now and a second renovation to do is far from ideal for my timeline and would eat into my reserves heavily.

Thanks in advance for your advise!

I wouldn't give up on trying to get the deposit....but you probably never will....and since they are in the middle of a one year lease, where they moved in with no deposit, I think you are pretty much screwed.

Since the place is trashed and you are going to have to remodel anyway..... chance are that you will be giving the deposit back anyway, unless they screw you on rent at the end etc...so in the end it probably wont matter.

I think I would ride out the remainder of their lease....keep on them about the deposit to at least show that you aren't "soft" and will let them off the hook for other stuff, like late rent......and then not renew the lease, renovate and put in new tenants.

Be a hard *** on late rent and evict them if they don't keep up with that aspect..... trying to evict them based on no deposit half way through the lease, is probably a waste of time....

We had a similar situation when we bought our building. We did not have good documentation of move in condition from the previous owner, some tenants had no SDs. We did not collect deposits on the inherited tenants, just moved people out as we were ready to upgrade the units. We collected SDs going forward.

I would personally work with them this time but don’t cut them too much slack or they will take advantage of you. I’ve dealt with this situation in the past and it worked out for me but every situation is different. You just don’t want to kick them out and be stuck with a large make ready bill at this point in the deal. Please reach out if I can be of more assistance I’m more than happy to help.

It's winter. You're in Alaska. The tenants are already in place. They are paying rent. Are they paying utilities too? If so, are the utilities up to date? I understand the problem began when the previous landlord failed to get a security deposit from the tenants in this one unit. I wouldn't push this on the tenants at this time of year and in the midst of the holiday season. Instead, I would try to establish a good landlord-tenant relationship and negotiate a win-win.

We've bought places with this scenario... some with security deposits and some without.   We didn't go after the old tenants to place new deposits, but we could have if we had given them the proper legal notice to change the terms of tenancy. Instead we documented clearly in our new contracts the exact amount that each had paid, and we had proof of this from their old contracts and from what both the previous landlord and the tenants told us. The security deposit was not as important to us as establishing good communication, respect and trust with our tenants.

You need to check the landlord-tenant laws for your jurisdiction and see what's required to do what you want to do. Did you give them the proper legal notice to make this change or a legal notice to comply with current terms?  What does their lease actually say about the deposit?

Everything's negotiable.  Consider these three options.....

1. Waive the security deposit, at least for the time being. See how they otherwise perform as tenants. Can they make it at least through the winter? You'll want that unit occupied and heated, especially at this time of year.

2. Reinstate the agreement from the previous landlord and contract with the tenants to pay an extra $200 per month until you have the $1000.... beginning January 1, 2018. Or another payment plan of your choosing.

3. You can tell them to pay up (if you do so with proper legal notice and their current lease support this) and hope they will pay you the $1000.  Doubtful.  This may lead you into an eviction process, tenants displaced, and an empty unit in January in Alaska!  [Not a good option for any of the parties involved.]

Everyone has choices.  Sometimes the choices for tenants and the choices for landlords are tough.  Wish is was easier. Hang in there!

Thanks everybody for all the great input! My first instinct is to be tough on them and "train them early and often" as I've seen it said on here but you're right, the middle of winter in Alaska is not a great time to have a vacancy. But...

Great news! I told them I would be bringing a "pay or quit" notice by today for the rent and deposit and they immediately replied that they had both the rent and the deposit and could pay today. It appears that they had  the money after all! Hopefully this doesn't affect their ability to pay rent next month.

Based on that response after you told them about the pay or quit, I would absolutely not believe any excuse they give you for anything else as it appears they were hoping you would forgive and move on.

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