Security deposit "delay" - how to write this into contract?

Question

I have a unique situation.

Bought a condo unit six months ago and it came with a tenant and lease.  The lease expires the end of this month (November 2012).

The lease was very simple and the tenant was living their for FREE.  Basically the previous owner didn't need the condo unit and allowed a relative to live there.  As part of the negotiation I got the seller to credit the agreed upon sale price by six months of market rent rate, and hold in escrow another month of security deposit which is to be returned when this lease expires.

Last month I asked the tenant if he wants to renew a new lease at the market rent rate.  He said no.  I said fine, let's just meet up at the end of the month and do a walk through and key transfer.

Two days ago he said situation changed and he wants to renew.  I said OK I will send you a new lease agreement to look over.  I pulled the standard Florida Realtors residential lease form, nothing too complicated, completed it and sent it over.  I am asking for only first month rent and security deposit.

Standard down here is first month, last month and security deposit.

But I am not asking last month because he is an existing tenant.

However he just told me he can't afford to give me two months rent all at once.  He is asking to pay 1 month rent at time of signing new lease, and wait for "a couple of weeks" on the security deposit.

What do you suggest?

Should I even sign the lease without the deposit?

I am thinking if I do I need to modify the lease to reflect this...like a clause "Security Deposit to be paid by xxxxxx or lease is null and void..." some way to protect myself that he is not just buying another month to move then sign a new lease, after 1 month he leaves and I would be totally unprepared and he is not even out a deposit.

Suggestions?  Thanks in advance.

Steve Babiak · Answer

Who are you supposed to return the existing deposit to, the seller?  If so, then have this relative of the seller borrow that money from the seller when you return it.

But I suspect you will be in trouble with this person as a tenant.  Basically, they lived rent-free for six months, and have no rental history that you can identify.  And they have no savings to use as a deposit!?!?  I would qualify such a person just the same as any new tenant, and see if they met all my rental criteria.  With no rental / housing payment history, I have some tougher requirements for credit history and debt and income.  Monthly gross income must be at least 3 times monthly rent.

Rob K. · Answer

Where does all his money go, up his nose? He hasn't paid a dime for six months and he's broke?

I see this all the time with deadbeats who walked away from their house and now want to rent. They didn't make payments for a year or two and have nothing in the bank. One guy didn't make payments for three years and was working that whole time. I asked him if he had the $30,000 in the bank that he saved by stiffing the bank? He looked at me with a vacant stare.

Steve L. · Answer

If this was me and I felt the tenant was worth the risk (few are).  I would allow them to pay the security deposit upfront and give them some flexibility on the rent.

Tenants believe that security deposits aren't really necessary and you are much better off legally doing it this way.

Tiger M. · Answer

One more thought, i would take the entire security and 50% rent so if the contract is broken, you keep the deposit. There is nothing wrong with writing in the lease the balance paid within X number of days. Keep a copy of  your local landlord tenant laws handy so you can comply to your states laws for eviction.

Tiger M. · Answer

We are closing on many occupied properties and deal with this too often. We start with a rental application. If the guy has the job, references and not a credit criminal, we will put them in Tenant Bootcamp. In Vegas we take first and security as a norm on new leases, so what he is offering isn't that far off what we are used to. The main purpose is if we can train the tenant and turn them into a resident, it saves on the rehab and vacancy. If there are any games played at all, we just evict right away. I just had a cat stroke us on the application process, dragging it out over a couple days. There was the sign, or should I say Notice. Which we promptly filed and posted.
Best of luck.

Steven Hamilton II · Answer

Do yourself a favor and get him out now.

Jon Holdman · Answer

First months rent and deposit, in cash, before move in.  IMHO, its irrelevant that he's already in. As far as you're concerned, he's a new tenant.

When he said he didn't want to renew, you should have formalized that in writing.  At this point, you have nothing, so I would immediately give notice the lease is being terminated in accordance with local law.  Here in CO, that would mean you have to give 30 days notice before the next time rent is due.  You're too late for Dec 1, so that would be Jan 1.

I would try telling him no, no lease without first months rent and deposit in cash.  Perhaps he will come up with the money.  Perhaps he will move out.  If neither, you next step is to get a lawyer and begin an eviction.  Not sure how you're going to do this, since you have nothing saying he was going to leave and have no rent due.  Hence the need for a lawyer.

Kyle J. · Answer

In most "normal" situations, you would not let a tenant occupy your property or begin the lease without receiving all monies owed (i.e. rent, deposit, etc).  However, this doesn't appear to be a normal situation since the tenant is already in the property.

If I were you (assuming this is a tenant you want to keep), I would not write up a term lease yet.  I would let the tenant continue on a month-to-month agreement for one month since he only needs a couple more weeks to come up with the deposit.  Then, before the next month begins, you can collect the full deposit he owes you and have him sign the lease for whatever term you guys agree upon.

I just think there's some inherent potential problems with you having him sign a term lease without collecting the deposit he owes you, and then trying to cover yourself by writing in a clause like that.  If you do that and he doesn't pay you, you probably just made it harder on yourself to evict him.  Just keep it simple and let him continue living there for a month (without a lease) until he can come up with all the money.  That way, if he can't, it should be pretty simple to get him out since there's no lease in place.

Security deposit "delay" - how to write this into contract?

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