Selling a rental with a long-term tenant. What about the deposit?

8 Replies

I have had the same tenant in my rental for approximately 5 1/2 years.  I'm considering selling it and getting something else.  I'm confident that the deposit that was given to me before he moved in won't cover the years of wear and tear on the flooring, paint, overall upkeep, etc.  

If I sell the rental property with him in it, do I need to refund the deposit or ??

This is in Washington State.  Thanks!

what Thomas said, and also the deposit is not to be used to pay for normal wear and tear

@Matt Gilroy The deposit should come off the top at the closing Unless you arrange otherwise . I bought a property where I agreed to allow the seller to keep the deposits . You have to sign an addendum of sorts because normally that has to be transferred with the property . It’s technically not your money it’s the tenants . Each state is different so do research

@Matt Gilroy I live and operate a residential property business in Washington State. Yes you need to know and abide by the residential rental laws of the state of Washington. All security deposits held by the seller are transferred to the buyer at the time of closing. It doesn't require an attorney, just an attentive title company escrow officer who prepares the documents and handles the funds necessary to complete the transaction. The new owner will be held accountable for creating a final report on return (or retention) of the security deposit when the tenant moves out (whether or not they received the security deposit funds at the time of sale.) You should transfer the security deposit funds to the buyer during closing. Also, provide the buyer with other records such as copies of the current rental agreement, record of deposits, move-in condition report, and record of improvements made to the property since the tenant moved in. Tenants can't be charged for ordinary wear and tear. Landlords fair best when they charge for damages as they occur or as they are discovered. If not, the security deposit will rarely be enough.

Hi @Matt Gilroy,

Dennis M. mentioned the deposit is just transferred to the new buyer at the time of closing and is not for general wear and tear on the unit.  Paint and carpeting would certianly fall into this category.  If there is damage that would be a different case and the deposit would cover those charges.

If you decide to sell, be sure to provide all your information to the agent and that way potential buyers will be able to make decisions for themselves. When looking at properties that have had long term tenants the deposit amount is really not a factor in deciding whether or not we would move forward on a property.

Best of luck.

If the tenant is still in the unit the deposit definitely goes to the new buyer. It is technically not your money and in theory will go back to the tenant when moving or or as we know most likely will go to cover something the tenant broke or didn’t pay.