We have a signed lease for a tenant to move in Aug 1. Tenants let us know yesterday they need to break the lease agreement for a family emergency. We are trying to arrange new tenants ASAP. Are we legally obligated to return their full deposit? Is it legal for us to keep a prorated amount to cover days with no tenant beginning Aug 1? The property is in Indiana.
The only legal obligation is for the tenant to make each monthly payment until the lease expires (unless a termination fee is outlined in the lease, then the tenant is obligated to pay that).
Yes, you can keep as much deposit as is required to find a replacement tenant.
Since you are trying to arrange new tenants, you are already mitigating damages.
So if you only manage to find tenants to move in August 15, you can deduct half a month of rent from the deposit.
I guess some people think you can just sit back and force them to keep paying rent. Not so. Many states require landlords to mitigate damages, and since it is hard to collect more money from tenants, it's in your best interest to re-rent as fast as possible so that no more than the entire security deposit covers your loss.
Lease cancellations before move-in are not uncommon, and this is what security deposit protection is for.
Let the new lessees know the purpose of security deposit, and that you're doing everything you can to minimize the penalty they have to pay.
But go on Avvo and ask your local attorneys just to be sure.
oh, and get their lease cancellation and reason in writing. Make sure they state it's a "family emergency"
Not all states require that the landlord lease the property again. The tenant could be held accountable for the entire lease period. Know your local laws.