Security Deposit Return.

7 Replies

Hello BP,

I had a couple sign a 1 year lease with me and pay a $1000 security deposit on May 8th. Their move in date was set for June 30th. I was notified by the couple on May 24th that they want to break their lease because they "might separate".  They never moved in, they never received keys, that was all set to happen May 30th as described in the lease, so they could begin moving items in the house. I am actively searching for a new tenant. My property is listed on several sites & I have a for rent sign in the yard. 

If I don't find a tenant by July 30th, am I legally able to keep their deposit and apply it to lost rent, since I haven't found a qualified tenant after reasonably trying to mitigate my loss/damages. 

Any info is appreciated. 

Thank you!

@Jason Griffin

Not sure all your dates are correct, but what does your lease state? And your state laws? My state laws say landlord must attempt to mitigate their losses. But if you do lose rent then you most likely can charge them and/or keep their deposit for your losses since they did sign a lease. Be prepared to show your efforts to find a new tenant quickly.

@Anthony Wick. Thank you for the reply. The dates are correct. Their lease was to begin June 30th. I am asking if by July 30th I don't find a tenant can I apply their deposit towards 1 month rent since I would be losing a months rent. I do have documents with my attempts at finding a tenant. I also sent a certified letter to them regarding their intent to break the lease early. The lease does not state the deposit is non refundable. It does state though that the lease term is for 1 year. I'm in OH. Law states deposit can be used unpaid rent.

I just posted on something like this, so if anybody is keeping tabs, I may cut and paste a little where appropriate.

It may depend on the rent laws of the city/state of your property. Since I am familiar with California, I will talk about where I am located.

A signed residential lease is binding whether the tenant moves in or not. So unless the lease states otherwise, the tenant would be liable for the lease term. In general, the landlord must mitigate any losses, which you seem to be doing.

That said, I suggest you communicate with the tenant and give the tenant the option to terminate the lease immediately. How much of the security deposit to return is something you may negotiate with the tenant.

Technically, even if the tenant does not move in at all and the lease is still in force, you are not supposed to be showing and marketing the rental since, according the the lease, they have possession and not you. In order to gain possession, you may have to go through the eviction process (for nonpayment of rent), which obviously sounds illogical.

Hope that all makes sense. Good luck and let us know how it turns out.

@Jason Griffin the short answer is "Yes."

Once the tenant signs the lease, they are obligated to the terms. If they want to break it, you are obligated to make a "good faith effort" to find replacement tenants and minimize the damage to the departing tenant. It sounds like you're already doing this.

Another option is to develop a termination policy. For example, if the tenant terminates before actual occupancy, they could immediately forfeit their deposit, you terminate their lease, and everyone moves on. If you find a renter the next day, it's extra money in your pocket. If you don't find a renter for two months, you lose money but you reduce your losses and your departing tenant doesn't have to wonder about how long they will be on the hook. I also offer an early termination for tenants after they've moved in. If they have more than six months remaining on their lease, I charge them a two-month penalty. If they have less than six months remaining, I charge a one month penalty. They pay the penalty when they give notice, I treat their deposit like any move-out once they are out, and the tenant can even get a good Landlord reference since they are following my policy. About 80% of my tenants choose to pay the penalty because they don't want to be held responsible for rent until a new tenant is placed. And in most cases, I place a new tenant within a week or two of their departure so the fee is just extra income.

Yes, however, if you were told May 24th and the house is available for July 1; you had lots of time to find a suitable tenant and still have time to get it rented.  Make sure they sign off on cancelling the lease.

Only if you wrote up a receipt noting it as non refundable if the fail to move in. We call it Earnest Money that will be transferred to Security Deposit once they move in but if they don't move in they lose their Earnest Money.