Tenant did not sign lease, handed Security Deposit, now doesn't want the place and requesting refund

21 Replies

Yesterday, a prospective tenant called and scheduled a showing for one of my warehouse properties. Since I was out of town, I gave them the lock box code to tour the property. They looked at the property and texted me right back that they are very interested and would like to sign the lease right away as they were going out of country on Monday. I emailed the lease and told them that i need the signed lease and 4000$ cash(1 month rent(2000$) and 2000$ security deposit) and they can drop everything at one of my tenants as i was out of town. I get a text that she has an emergency and her mom will instead and come in and drop the cash and she will sign the lease electronically. This is when I smelled something fishy, but this property has been vacant for a while, So i thought I will take a chance. But to my surprise her mom came down and deposited 3000$ cash with my tenant and they gave her a receipt acknowledging the deposit. I texted back this morning again asking for the lease, she said she will sign and send it ASAP. I just got a text few mins back that they are not interested in signing the lease as they have to do extensive renovations and requesting a refund of their entire money as they have not signed the lease. 

I asked my friend to inspect the property now just to make sure and he said everything is fine except they key is missing.

Based on your experience, Please advise what will be the best course of action... Thanks in advance for all your help!

Did the tenant that received the money count and or examine the bills? Might be trying to launder money, too, thinking of you deposit that cash, and cut them back a check, etc. Be very cautious.
Originally posted by @Rob Thompson :
Did the tenant that received the money count and or examine the bills?

Might be trying to launder money, too, thinking of you deposit that cash, and cut them back a check, etc.

Be very cautious.

 He counted and deposited the money over night in the bank, it has not shown up in my account yet. Can I legally hold off the security deposit?

Originally posted by @Raj Kumar :
Originally posted by @Rob Thompson:
Did the tenant that received the money count and or examine the bills?

Might be trying to launder money, too, thinking of you deposit that cash, and cut them back a check, etc.

Be very cautious.

 He counted and deposited the money over night in the bank, it has not shown up in my account yet. Can I legally hold off the security deposit?

 I personally don't see how you'd have the standing to hold it but (standard disclaimer) I'm not a lawyer or a licensee in your state.  Wish I could be more help there but your story reminds me of a guy who walked up to me once and asked me to hold a large sum of money (so it appeared).  I declined and he got hostile, asking why I wouldn't do this favor for him.  I declined with fervor this time and he got the hint. 
  I asked a police officer later what the game was there. He told me the money appeared large but was likely a roll of ones with a few hundreds on top.  When this guy returned for his money later, he told me I'd likely have been accused of trying to scam the scammer...intimidation racket. 

This sounds very fishy .  Change the locks right away .  

Absolutely sounds a bit odd... change the locks to the property and give them back the money AFTER it clears in your account. Use a bank check for return of deposit, nothing with your account number and not cash.

Cash is immediately available in your account... If they deposited it then it is in your account NOW, and you can see the transaction. If you can't see it, then it didn't happen.

I think my tenant put it in the over night box, he did not deposit in the ATM. So it will not be available until the bank opens.

One of the things that made me very suspicious was I asked her to meet my tenant in person and give her driver license, so he can make a copy and send it to me. She texts me in an hour that she has an emergency and sends her mom over to hand over the cash.

The following are the texts I got from her this evening after I told her something is suspicious. 

"Nothing has been suspicious? We wanted to lease the property, it won't work, by GA law we have 3 business days to not execute the lease. The keys will be  there shortly. You cannot keep my money. I am filing a police report and I just hung up with my attorney, so I am fully aware you cannot keep my money. 

We would have given you a business check, you stated bring cash, that is suspicious. "

My response

"I never said I am not giving you back the money. I just need to talk to my lawyer. I am not as connected as you are, I don't have access to lawyer's over the weekend. You can file a police compliant by all means and you have every right to do so, but I am not going to do anything until 1)I talk to my lawyer and 2) They key is back in the lockbox. "

Her response again

"Thats fine, I am on the way to file a police report so there is a record to go with my cash receipt. Just so I am covered. I am on the way there. My mother will be there in an hour and she will take a video of her placing the key back in the lockbox.

And I responded sounds good to me.

I would bet it is a scam. Possibly laundering money (as said above) or maybe the bills are fake. I am assuming this was actually cash rather than a cashiers check etc. I would call the bank first thing and ask them to examine the bills. I would also tell them the money was safely deposited in a bank as per normal procedure and that you don't keep that type of cash on hand. Let them know that as soon as the bank examines the currency and confirms the deposit is valid you will be more than happy to refund their funds. If they are above board they should be fine with that. I would also tell them that due to the unusual nature of the entire transaction you are going to arrange to transfer the funds to them at your lawyers office so there can be an officer of the court there to witness the transaction so there will be no question of whether or not they received their funds in their entirety. Also that whoever picks up the funds will have to present valid ID that matches the name on the lease (even though they did not sign it) so the lawyer can make sure the proper person is receiving the funds. If they balk at this, stand firm. That would indicate to me they are running a scam. I would bet your lawyer will have a few additional ideas.

Honestly, I would feel very uncomfortable if there is this big of a rush. The fact that she has threatened you already makes things seem very not kosher. DO NOT GIVE ANY MONEY WITHOUT MAKING SURE THIS IS LEGIT. It very well could be... if that is the case, a couple of days is not going to make a difference. 

Do not allow them to return key to lock box.  Sure they are going to provide an edited video.  Remove the lockbox if you have to.  Offer to collect key at police station.

Agree that you should change the locks. Not sure what she means about her three days because she never signed a contract to trigger that rule. In good faith you can return the deposit as long as you are following the laws of your state and only after its cleared by the bank.

@Bill Hamilton made some excellent points.  Some things you should do, as others have mentioned are, immediately change the locks.  

Her hostile approach is throwing red flags.  There isn't anything to report to the police, and the cost of an attorney for her to ask what to do at this stage is highly illogical.  

In the future, this would seem a good reason not to give out the lock box combination in my opinion.  Always show a property or have someone show a property for you.   

I hope that helps -- this thread has certainly helped me. 

She gave you the information that you need. "Three business days to not execute the lease." To me that equates three business days to arrange for a refund. Or if the money is in the drop box, call your bank first thing Monday morning and have them hold the deposit and just return whatever they gave to you.  

Don't get desperate to get somebody into a vacant unit. Is this how you would have handled the situation if the unit had only been vacant for a week?

Thanks everyone for your responses!

I checked online this morning and money is in my account and I called the bank just to be sure, they said they run the bills thru the machine and if there were any counterfeit notes, they would have caught it.

The only reason I did it is because the prospective tenant said they have looked at 6 places and have to sign a lease by the end of the week and I did not want to loose them of my unavailability to show.

Originally posted by @Raj Kumar :

Thanks everyone for your responses!

I checked online this morning and money is in my account and I called the bank just to be sure, they said they run the bills thru the machine and if there were any counterfeit notes, they would have caught it.

The only reason I did it is because the prospective tenant said they have looked at 6 places and have to sign a lease by the end of the week and I did not want to loose them of my unavailability to show.

 Wow. You took some big risks over the risk of not having a tenant. Giving out the lock box code. Having them tour the place themselves. Delivering a pile of cash to one of your tenants. If I were writing a book over what not to do, I would probably use your scenario as copy!

You made the tenant's desperation for housing your problem, and you appeared desperate yourself. Anyway, I believe you have to return the deposit since they did not sign the lease, and it would be the ethical thing to do anyway since you are not out anything. 

I think there are a lot of lessons to be learned here. 

Yes, lots of lessons learnt and I am planning to return the deposit. I am going to ask them to return the key and the receipt, give them a check and ask for acknowledgement that they got their money back.

They may ask for cash , only give them a check . I would still change the locks . 

Call us crazy, but giving out a lockbox code in my area can result in suspension/revocation of your license. I like that these new electronic boxes keep track of who's accessing them. I wouldn't even use a mechanical box nowadays. 

Rule #1: put it in writing! When you accepted the cash, you should have made them sign a holding agreement that states you are accepting their funds in exchange for holding the property off the market. It should also state what happens if they change their mind and choose to cancel, when they will get their money back, etc.

You can't give them back the money until the back has cleared it. Their threat of an attorney and police report is likely just a smoke screen to intimidate you. I regularly hear the same threat from tenants that can't even afford their utility bill. I'm not an attorney, but I would recommend letting the funds clear the bank and then refunding them their money. MAKE THEM SIGN a typed document that states exactly what happened, who paid, who received the money back, etc. You may even consider charging them for the cost of changing the locks.

In the future you can protect yourself by designing a Holding Agreement and sticking with it.

I read this post with interest because I have had a couple of instances where potential tenants give me a deposit and change their minds. I always make them sign a statement explaining that their deposit is non-refundable unless they actually move into the apartment, but honestly, if I get another tenant to rent it, I usually refund it unless there were other expenses occurred by me because of their change of mind.

I'm a little shocked by most people here thinking it's some kind of fraud rather than the tenant just having buyers remorse. I also find that it's a problem that there wasn't someone there to explain what the deposit was, have some sort of document signed (rather than just a receipt for the money), and that it's probably not a "best practices" case when an apartment is shown and rented by giving them access to the lock box and dropping the money off to another tenant.

Let me add that I've done plenty of things while renting that were not exactly the smartest when I am busy with other matters.  I think in this case I would just return the money and chalk it up as a minor inconvenience in the grander scheme of things.

"Nothing has been suspicious? We wanted to lease the property, it won't work, by GA law we have 3 business days to not execute the lease."

Why are they quoting GA law when your profile says VA? Is this property in GA?

To the person saying they are shocked many would think fraud is a scenario that is surprising. In this day and age fraud is mainstream. GA is one state where fraud is rampant with all kinds of schemes.

If a lot of criminals simply used their thought process to legally make money they would likely make many times over what they get committing crimes. Eventually the crimes catch up with them and the penalty far outweighs any short term benefit they perceive they were getting.   

This whole topic is a mess. Who knows if the people will claim they gave more money to this tenant on behalf of the owner?? All kinds of accusations might start flying.

With commercial properties legitimate tenants generally do not conduct business this way. A methodical process and multiple meetings occur before contemplation of a commitment. The tenant has to logistically look at the site location and see if it works on multiple levels for their business. I would want to see their financials and business profit and loss statements that were audited by an outside company. Many layers of approval and negotiation would have to happen to arrive at an executed lease and security deposit for a commercial property.  

This just simply a master class of what not to do. Anytime someone tells me move fast or it will be gone I tell them that I work SLOW and look at EVERYTHING.

Genuine business people will appreciate that. Fraudsters who are lazy will move on to someone they can manipulate quickly for their desired result.

I hop this situation turns out okay. Make sure with your attorney this potential tenant has no rights implied or otherwise before changing the locks. Hopefully they have not tried to sublease to another undisclosed party and collect a fee.

I know nothing of the landlord or tenants in this situation one way or the other. 

No legal advice given. 

   

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