Can I retain holding deposit if tenant changes mind, no lease sig

Question

Made a verbal agreement to start lease July 3rd. I took a holding deposit and now tenant wants their money back. Am I obligated to return entire deposit? (I know,  sign lease immediately next time,  but this time I did not)

Matt M. · Answer

@Kendall Chamberlain

Give them their money back and move on. No need for bad blood, and you could still possibly find a new tenant quickly.

Michael Noto · Answer

As others have said, we make accepted applicant sign a form saying their deposit to hold in non-refundable should they choose to back out of the apartment. That is essentially their end of the bargain since we are taking the apartment off the market and not showing it to anyone else once they give the deposit.

Lesson learned, anyone with experience has been in this spot and it will make you a stronger landlord in the long run.

Chris Herrera · Answer

I wouldn’t stop showing any rental until the lease is signed and a security deposit is given, if they back out after that then I have a clause for that in the lease.

In your case, it’s 200 bucks and it’s already draining your time and energy debating whether to keep it or not.

Just return it and keep showing the unit and cough this up as a learning moment for next time. Is it really worth all the headache and back and forth for 200$ at this point? I would doubt it and rather have piece of mind by returning it and focusing on what’s important, which is renting the unit as soon as possible.

Steven Ko · Answer

Why is it even a question if you should return the money or not -.-

Theresa Harris · Answer

Check your local laws.  Most people would take a non-refundable deposit and get them to sign a lease.  Once they move in, that deposit becomes their security deposit.

Amy Beth · Answer

@Kendall Chamberlain. Unless the potential tenant signed a form saying that it was non-refundable, I would return it. Otherwise, you could be sued in small claims court.

I would just chalk this up as a lesson and do better in the future.  Advertise the property today and find a new tenant ASAP. Make sure that the next tenant pays the first month rent and security deposit and signs the lease at the same time to avoid this happening again.

Jay Bob · Answer

@Kendall Chamberlain

I will give the money back and move on. You may get referre from the same person in the future.

Joyce Tavares · Answer

When I take a hold deposit I am very clear that if they change their mind, for any reason, then it is considered a re-renting fee and is not refundable since I take it off the market when they give me the hold deposit.  Once they sign the lease, it goes 100% towards the lease.  Have never had an issue with that and everyone who has put down a hold deposit has rented the unit.

Steve Vaughan · Answer

I have a simple holding agreement signed at the time holding money changes hands.   Deposit is no where on the form.  Deposit by definition means refundable.

That said, if you aren't harmed by them backing out refund all but the app fee.  Karma exists in the LL business.

Jill F. · Answer

I usually insist on a non-refundable reservation fee when someone needs extra time to get up the money for a lease. I've never litigated it. In your case I'd probably try to negotiate a partial refund and have them sign a release.

Can I retain holding deposit if tenant changes mind, no lease sig

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