Tenant Backed out 2 hours before handing them the keys?

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Tenant Backed out 2 hours before handing them the keys?

Chris LeMay
Woodbury, MN · Member since 2018 · 9 posts · 12 votes

Need some guidance on this one as this is a first for me.  Here is the situation....

We purchased a condo on Jan 16th. We found tenants and they have signed a 12 month lease. They were scheduled to move in yesterday at 5pm. At 3pm yesterday, they sent me an e-mail and said they would not be moving in because of the HOA terms. They did not specify which terms they cannot agree to, but I suspect they simply found a better place and are using the HOA as an excuse. Today, they asked for their Security Deposit back. At this point, I do not believe that I need to return the money to them because I have to start the entire process over. (Show the unit, process applications, run background checks, sign new leases etc.) The lease is in MN and the lease itself really does not say anything that would help me determine what I must do legally. From my perspective, they broke the lease by not moving in on the scheduled day. The Security Deposit will not be returned because I owe the bank the first month's rent in addition to the costs I stated above. Please let me know your thoughts from a legal perspective.

Thanks!

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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y

Of course fall back on local laws.  I do not return security deposits for broken leases.  The deposit holds the unit and is nonrefundable.  They have a contract to pay you 12 months rent, they are lucky to get off by only losing their deposit.

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  • Rhonda Wilson
    Rental Property Investor · Tacoma, WA · Member since 2018 · 113 posts · 149 votes
    7y

    It's hard to give an exact answer without seeing the exact wording of whatever lease contract the tenants signed. In general, if they signed a 12-month lease, that is a contract and they are legally obligated to fulfill the terms of the contract. However, most states put limitations on the contract in favor of the tenant. For example, a break-lease fee in some states might be limited to 1 1/2 month's rent, for example. You need to find out the laws in your state. 

    I have always had a policy of never charging more than the period of vacancy. For example, if a tenant breaks a lease on the first of the month and I move a new tenant in 3 weeks later, I charge the original tenant for 3 weeks. In your case, I would probably hold on to the deposit and try to re-rent the unit. If you re-rent quickly, you may be able to refund part of the deposit. At the very least, you should use the deposit to cover you for their failure to give you 30 days notice. 

    Since you don't know the laws of your state, you may want to consult a lawyer.

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  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    My lease requires a "Holding Fee". Once the tenant has signed the lease, gotten utilities into their name, and paid the first months rent, this holding fee turns into a security deposit. The Holding Fee is non-refundable should the tenants decide to not sign the lease or not move into the unit. Often times, of course, the holding fee, first months rent, and signing of the lease all happen at once. 

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  • Fred Krauss
    Member since 2018 · 14 posts · 7 votes
    7y

    @Chris LeMay

    Here in Virginia there is no cooling off period. The signed lease is final, unless you want to let them out of the lease. Otherwise they are obligated to pay rent until you have another tenant move in. You can also collect legal costs. Our lease have a break lease clause notify 60 days before the break lease date, pay two months rent and loss of security deposit.

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  • Steve Patterson
    Member since 2019 · 15 posts · 16 votes
    7y

    @Thomas S.

    This is the approach I would take. Make them do the work if they want it back. You have nothing to lose.

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