I have prospective tenant who has signed a lease but hasn't sent deposit yet. I made the mistake of also signing lease and sending back to them before getting deposit (won't make this mistake again!)
I now have someone else ready to give me a check and sign lease today. What is my legal/ethical obligation to first people that signed lease but no deposit yet. In my mind until have both signed lease AND deposit property isn't reserved but feels like I'm in gray area since I've signed lease.
Not sure if it matters but I'm in Colorado. Thanks in advance for help.
do you have in your lease a date when the deposit is do? at signing of the lease, week from signing? if not they are holding the cards. i would call them and let them know you will need the deposit, if they want out then let them out but have them sign an agreement that they are withdrawing from the lease.
Hey Charlie, legally, once you have signed the lease, it is in full effect, and you need to refer to its terms on breaking it. Definitely call the tenants and let them know the deposit is due and work with them on getting payment. If you'd like, offer them the option to void the lease since no money has been exchanged, but it sounds like they want to move in and chances are they will pay the deposit.
Deposit paid -> lease sign -> copy to them -> keys once they pay rent in full and deposit in full (if enforceable).
When are they suppose to move in? I would call them and say something to the effect of " I just realized I never took a deposit from you. Please send one by XYZ date otherewise I will need to void lease"
Once you've both signed the lease it has been executed and you'd probably have to go through eviction for non payment. Work with them to collect your deposit and don't make that mistake again.
Thanks all, got deposit so all good. But will get deposit first next time! Thanks again!
@Charlie Gruber this should be a good motivator for you to study the issue, develop a policy, and PUT IT IN WRITING!
Once the application is approved, I offer the rental to the applicant and give them 24 hours to put money in my hand. Payment must be money order or certified check so I know it's good. You don't want to take a personal check and then find out a week later that it bounced. I have them sign a "Holding Agreement" that says I've accepted the deposit and will hold the unit until a specific date, at which time they must sign the lease and pay first month's rent and anything else owed.
My policy also says I'll only hold a unit vacant for one week and then they have to start paying rent. I'm not taking a property off the market and holding it empty for 1-2 months! I sometimes make exceptions and hold a property for 2-3 weeks but that's usually only for really, really good prospects in a really, really slow market.
You also need to spell out specifically what happens if they cancel or fail to complete the transaction. I recently had a guy send us the deposit and sign the holding agreement, only to cancel a few days later. I've also had tenants put down the deposit and then fail to show up when it's time to sign the lease. Some people say the tenant automatically forfeits the entire deposit. I charge a $100 admin fee, then a daily fee equal to a day of rent until the unit is rented by someone else.
@Charlie Gruber I collect any/all money owed (i.e. security deposit, first month’s rent, etc) at the same time as the lease signing.
Glad it worked out for you this time.
Thanks all for great suggestions. Agree with @Nathan G. should get payment within 24 hours via money order or certified check. One thing I left out in original post was renters coming from China. This is actually my 3rd person I've rented to that was remote and couldn't collect deposit in person. In this type of case what are suggestions for collecting deposit when renter remote? I use Cozy.co to collect monthly rent but this takes several days to setup and thus not best when need quick deposit.
Try to get the deposit ASAP. I made this mistake on my first time renting out. Tenants informed me 1 days before the moving in day that they won’t be moving in :(
Can you use Venmo? That’s how people pay electronically all the time. Appreciate you sharing , currently in the hunt for my first small multi family home!