Being sued for keeping security deposit.

35 Replies

Originally posted by @Mike Cumbie :

So the $1100 was not their rent, it was you not paying the mortgage for June?

Then you forgave the June rent from the tenant

Then you tried to take the $1100 out of their security deposit for your mortgage payment? 

Not quite, let me put things in some chronological order here:

1) On June 1st, rent was due in the amount of $1,250. 

2) After 5 days the rent according to our lease was deemed LATE. No response when we attempted to make contact. But since we were in the process of selling to them it made us hesitant as to what we we’re going to do next. 

3) On June 15th we received a call from our agent stating that the renters would not be able to close and pay the rent at the same time. So he asked us on behalf of them to forgive the rent. Subsequently we would not have to pay our mortgage and both of us would walk away happy. He stated that as long as we closed on the 15th, our mortgage payment would not be considered late. I stated, “That’s all fine as long as it was true. If I do not have to pay the remaining amount that I owe to the bank, then they don’t have to pay the rent.” 

4) On Monday we received a statement that showed a deduction (after the fact) of $1,147.00 from our profit and included a late fee that our mortgage company charged. 

Since our verbal contingency was not honored, and also feeling that the agent and the buyers were working together in this, we kept $1147.00 from their deposit (a default in rent is a reasonable cause to keep some of the deposit according to CA law) and sent the rest to them. 

We have already sent them the rest of the money due to the fact we live far away, but I cannot help but feel slighted and ripped off to put it mildly. Learned alot in the process though. 

Originally posted by @Roger S. :

I'm trying to figure out how you can forgive the rent without it coming from your profit.

My thoughts exactly but when you’re new to selling and an agent calls you and assures you it can happen I fell for it. 

Originally posted by @Jacob Mendrin :

Thanks guys for the responses, very insightful. 

I'd like to clarify a few things. Just for everyone's benefit and learning. 

1) The new owners of the home ARE the renters. While they were living in the property (under my ownership) they did not pay rent for 22 days.

...

3) ...  I stated that I would only forgive 22 days of rent as long as it did not come out of my profit of the house sale.

Where did you think the money was coming from?  Of course if you "forgive" rent it's coming out of your pocket.  This is self evident.  

The tenant/buyer is not in "default" of rent - you forgave it.

Further, you did not understand how mortgages work (why would the bank just forgive the partial month's interest?).

Return the security deposit and chalk it up as a learning experience and going forward to actually understand how things work.  Don't forgive money owed to you that you don't actually intend to forgive. 

Originally posted by @Jacob Mendrin :
Originally posted by @Doug McVinua:

If a Realtor is deemed to have conducted themselves in a less than desirable way a Complaint can be filed with the Association and or the AZ Department of Real Estate. 

The Real estate department would primarily take interest if the public was harmed via a law or rule being broken. From what I read I'm not sure this topic rises to that level.

Realtors agree to a Code of Ethics, a much broader perspective of items. You can breach the Code of Ethics and not break a law. Artice 1 is about treating parties fairly and honestly, sort of a catch-all.

What is the promise of "No Late fee"?

Because I was under the assumption ...

Hanlon's Razor is rearing its had again. This doesn't sound like malice on anyone's part, but more miscommunication/ misunderstanding. 

You just paid $1,100 to learn that you shouldn't assume anything in a business transaction. No big deal, happens to everyone.

Sure, filing a complainant with the RE commission feels good, but the proof of wrongdoing sounds thin at best. You'd probably get more traction voicing you feelings to the agent and their broker. Maybe they make you whole if you ask nicely and don't roll in on the war path. Maybe you paid some tuition to the school of hard knocks. 

Originally posted by @Mike Cumbie :

So the $1100 was not their rent, it was you not paying the mortgage for June?

Then you forgave the June rent from the tenant

Then you tried to take the $1100 out of their security deposit for your mortgage payment? 

 Glad I'm not the only one confused by this....

@Jacob Mendrin Just to be clear on a couple of basic things, no criticism intended:

Mtg payments are paid in Arrears, not in advance....a payment due on July 1st is for the principle and interest earned during June.  So, yeah that payment is due even if you close July1.

If you Pay your mtg payment by the 15th of the month, there is no penalty.  When you Close on a sale on the 15th, the Pay Off, including June's princ/interest will Not be to the lender by the 15th, probably a week later.  This is probably the misunderstanding your agent had.

In Florida you have 30 days to send notice of security deposit claim and it must be done by certified mail to last known address. Even if they owed $10,000 you could not keep a dime if you don’t properly follow the claims process. If they take you to court they will win and you will have to pay their attorney fees. Your agent should have done a contract addendum stating how deposit would be handled. This is Florida but I would bet Cali is similar

I think you're being taken for a ride.

You should have demanded the rent on June 1st (or 5th, or something).

When they called on the 15th to say they couldn't afford the rent and to close, you should have walked away.

When your agent contacted you to negotiate a forgiveness of debt, they should have advised you to put it in writing. They didn't, so your agent should be fired or help reimburse you for that loss. You were also charged a late fee by the mortgage company and that late fee should be paid by whomever promised you a closing by the 15th or whomever caused you to not meet that deadline.

The tenants did not pay rent for June but they occupied the home as tenants with a written lease agreement. Unless there is a written agreement that over-rides the lease agreement, they owe rent. Yes, they could argue in court that you had a verbal agreement, but you could counter that the verbal agreement was to close no later than June 15th. I'm not the judge but I don't think they have a leg to stand on.

Originally posted by @Nathan G. :

I think you're being taken for a ride.

You should have demanded the rent on June 1st (or 5th, or something).

When they called on the 15th to say they couldn't afford the rent and to close, you should have walked away.

When your agent contacted you to negotiate a forgiveness of debt, they should have advised you to put it in writing. They didn't, so your agent should be fired or help reimburse you for that loss. You were also charged a late fee by the mortgage company and that late fee should be paid by whomever promised you a closing by the 15th or whomever caused you to not meet that deadline.

The tenants did not pay rent for June but they occupied the home as tenants with a written lease agreement. Unless there is a written agreement that over-rides the lease agreement, they owe rent. Yes, they could argue in court that you had a verbal agreement, but you could counter that the verbal agreement was to close no later than June 15th. I'm not the judge but I don't think they have a leg to stand on.

Thank you for your comments Nathan, they express exactly how I feel. My only problem is the amount of money it would take to defend myself does not make it worth it. A 10 hour drive plus a hotel room and two days off of work just make it not feasible. 

Many people threaten to sue but very few actually do it. If they decide to sue, you could negotiate a settlement with them and avoid court. Or you could turn around and sue the agent for malpractice or counter-sue this buyer. While you are considering the cost of defending yourself, they have to consider the cost of coming after you based on a verbal agreement they apparently violated.

Throwing in the towel every time someone threatens to sue would have cost me tens of thousands over the years. I have had many, many threats but have never actually been sued. I believe it's because I refuse to acknowledge threats...and I almost always have evidence to back me up.

To be clear, again: the status of the deposit for the rental agreement is in No Way related to anything that happened in the negotiations/contract/closing if the Sale. They are two separate unrelated transactions, since there was no written agreement changing the the handling of the deposit.