Inherited tenants, no proof of security deposit

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Inherited tenants, no proof of security deposit

Bertha T.
Member since 2021 · 1 post · 0 votes

So my husband inherited a multifamily home in illinois when his dad died. We moved in to the first floor. And now have also inherited tenants in the upstairs apartment. These tenants didn't have a signed lease. They are leaving in 2 months and are asking for their security deposit. 

However, we don't know if the departed father ever collected a security deposit from the tenant. We asked for a receipt or any kind of proof. The tenant has none. Now they are bringing up lawyers.

I am at a lost. Are we liable for a security deposit when there is no proof of one or how much? 

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Tracy StreichPro Member
Real Estate Broker · Tulsa- OKC Oklahoma · Member since 2017 · 868 posts · 801 votes
5y

If they have proof you are on the hook.    However the lease would state the amount even if they don't have proof.   No lease no proof even with a lawyer they will be hard pressed.   How much money are we talking about.  Always amazed at how fast someone worried about less than $1000 says they have a lawyer.   Will cost a minimum of $200 just to file and get to court in small claims with no lawyer.  

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  • Clint ShelleyPro Member
    Surveyor · Dothan, AL · Member since 2014 · 425 posts · 391 votes
    5y

    @Bertha Trujillo

    If there's no lease how could they prove they gave a security deposit in the first place? If it were me I would say look you can't prove and I can't prove, If the apartment is left with no damage and no repair bill, I would just offer to give them a couple hundred bucks for moving truck. Have your lawyer draft up some paperwork for this agreement and all is well. Of course you should check your local landlord laws. Good luck.

    Clint

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  • George SkidisPro Member
    Rental Property Investor · Belleville, IL · Member since 2017 · 875 posts · 529 votes
    5y

    Unless they are members of LegalShield or a similar company they probably don't have the money to hire a lawyer for a small deposit dispute in any jurisdiction except maybe Chicago which is tenant friendly and landlord adverse. Even if they get free legal help the filing fee is an obstacle unless they can get that waived by proving low income status.

    A demand letter is not a lawsuit. You should research the cost to file a lawsuit in your court of jurisdiction.

    Start preparing a list of things you would accept as proof of deposit. Some Examples are:

    1. A lease signed by both the resident and former owner. (you said there is none)

    2. A receipt signed by the former owner.

    3. A cancelled check made out to the former owner with "Security Deposit" or something similar written on the memo line. If they know the check number they can request a certified copy from their bank by paying a small fee.

    4. A money order receipt of purchase.

    Things you can check. The former owners tax returns and banking records. Who was their accountant or CPA. Check with them.

    In the mean time start finding out what is required for you to rent the unit again. Depending on location there may be an occupancy inspection for you and an occupancy permit for the next resident needed.

    If there is a code enforcement or occupancy inspection, get everything fixed before the inspector sees it.

    Frequently counties and other municipalities keep a copy of the lease before issuing an occupancy permit. Check with code enforcement or the city clerk and get a copy of whatever is in their file. You might as well figure out what you are going to be required to do to get pass a new inspection and get a permit.

    I am NOT an Attorney and do not paly one on television. If you need an attorney referrals PM me.

    Go to the National Real Estate Investors association and find a REIA near you. Great education for minimal investment.

    Good Luck and Good Investing

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  • Tracy StreichPro Member
    Real Estate Broker · Tulsa- OKC Oklahoma · Member since 2017 · 868 posts · 801 votes
    5y

    If they have proof you are on the hook.    However the lease would state the amount even if they don't have proof.   No lease no proof even with a lawyer they will be hard pressed.   How much money are we talking about.  Always amazed at how fast someone worried about less than $1000 says they have a lawyer.   Will cost a minimum of $200 just to file and get to court in small claims with no lawyer.  

    [email protected]918-728-8080
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  • Zachary Elliott
    Real Estate Agent · Burlington, KY · Member since 2018 · 206 posts · 232 votes
    5y

    Maybe I'm asking the obvious question here, but I'm assuming nothing was provided during probate to indicate security deposits? Or when the property was deeded over to you? In a typical purchase scenario, the security deposit is provided at closing. 

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  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    @Bertha T. taking the long view here, you just got a windfall of an inheritance and the easy exit of an inherited tenant, allowing you an easier time selling it/renovating it or just renting it to someone you screened. Have they been there a long time? If so I think I'd get the number they think they are owed and say you can't find any proof in the estate but will accept their documentation or even their word on the amount in exchange for a clean undamaged apt ( and a release). Not urging you to be a pushover but this isn't something to spend a lot of time on.

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  • Mark AinleyBusiness Member
    Property Manager · Roselle, IL (Chicago Suburb) · Member since 2013 · 2k+ posts · 1k+ votes
    5y

    @Bertha T. Depending on what county you are in my answer can change but with the sympathetic press tenants are getting these days and the bad press landlords are getting I would not test my luck in legal cases right now.  At the same time what type of dollar amount are we talking here?  $1000 or $1500?  The risk and opportunity cost is not worth you fighting it.  Like @Jonathan R McLaughlin mentioned you don't have to be a push over but be are a smarter business person that choses their battles wisely.  Cases like this enforcing principle doesn't always make you the winner in the end.  

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  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @Bertha T. I am going through a similar situation right now with an inherited tenant in a building I own in Cicero. This tenant was a legacy tenant and no security deposits were provided by the previous owner at closing. This guy told my assistant he is moving out and using his security deposit to cover the last month's rent. With the current environment, I would rather be rid of him and not have to deal with a bad tenant and I will end up eating the 1 month. In the long game, this isn't the end of the world for me. It is frustrating, but I don't really have a mechanism to pursue him with the courts closed, and it is better to get the unit back so I can start collecting (much higher) rents. 

    In your scenario, I would just give the person back their deposit and move on. Most likely it is a smaller deposit than you think. What is the monthly rent? You are getting to take advantage of stepped up basis right now when you sell so this security deposit will be just a blip on the radar. 

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    They should have a copy of their lease.  Ask them how much they were paying when they moved in.  What is the standard deposit for the area-1/2 month, 1 month's rent?  Do the inspection once they move out and if it is in good shape, give them back 1/2 month's rent.  You're probably talking $500??

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  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Bertha T.:

    So my husband inherited a multifamily home in illinois when his dad died. We moved in to the first floor. And now have also inherited tenants in the upstairs apartment. These tenants didn't have a signed lease. They are leaving in 2 months and are asking for their security deposit. 

    However, we don't know if the departed father ever collected a security deposit from the tenant. We asked for a receipt or any kind of proof. The tenant has none. Now they are bringing up lawyers.

    I am at a lost. Are we liable for a security deposit when there is no proof of one or how much? 

    If the original lease shows a security deposit then you are liable? Find the original lease.

    312-681-7487
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