Seller refusing to give prorated rent and tenant security deposit

Baltimore, Maryland
Buying & Selling Real Estate
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Seller refusing to give prorated rent and tenant security deposit

Beenna Han
Member since 2023 · 6 posts · 4 votes

So I purchased a multi family unit that has an existing tenant in Maryland. I closed the purchase deal on late May, and soon after the closing I realized that the settlement did not include prorated rent (around $300) and tenant security deposit ($1200) related to the existing tenant. 

Unfortunately my real estate agent and title company did not check that these items should be included at the closing and I, as a first-time home buyer, did not know either at that time. So after the closing, I asked my real estate agent to contact the seller and asked for the prorated rent and tenant security deposit. The seller refused, saying the seller already used up the security deposit because the tenant did not pay utilities thus no security deposit left, and they had some financial loss because closing was delayed because of my mortgage lender's issue thus no prorated rent for me. After this refusal the seller never responded. What should I do? Are the real estate agent or title company responsible for this because they missed to check these items at the closing? or Can I do some small claim for asking these items? 

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  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    3y

    @Beenna Han, first off the seller's statement about using the deposit for unpaid utilities likely does not hold water. The security deposit money belongs to the tenant. So, your state likely requires the tenant to be notified about any deductions from that money and I highly doubt the seller communicated that to the seller.

    The first step I would take is to review the sales contract and make sure that it included language about prorated rents and the turnover of deposit monies. If it did NOT then you could try to hold your agent/broker accountable.

    If it is in the contract, then the agent did their job. A good agent would review the settlement statement (Closing Disclosure) and likely catch this error, but it isn't their main responsibility.

    If it is in the contract and the title agent didn't include it, then you could try to hold the title agent accountable.

    Since this is a small claim, the party at fault might just pay it, or they should carry errors and omissions insurance that could cover it. If they refuse, you can probably take it to small claims court and get a judgement without needing to pay for a lawyer.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    For the security deposit, if the tenant knows that it is gone because they didn't pay utilities then that is between them and the seller.  When (if) you renew the lease, you can ask them to pay a security deposit to you.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y
    Quote from @Kevin Sobilo:

    @Beenna Han, first off the seller's statement about using the deposit for unpaid utilities likely does not hold water. The security deposit money belongs to the tenant. So, your state likely requires the tenant to be notified about any deductions from that money and I highly doubt the seller communicated that to the seller.

    The first step I would take is to review the sales contract and make sure that it included language about prorated rents and the turnover of deposit monies. If it did NOT then you could try to hold your agent/broker accountable.

    If it is in the contract, then the agent did their job. A good agent would review the settlement statement (Closing Disclosure) and likely catch this error, but it isn't their main responsibility.

    If it is in the contract and the title agent didn't include it, then you could try to hold the title agent accountable.

    Since this is a small claim, the party at fault might just pay it, or they should carry errors and omissions insurance that could cover it. If they refuse, you can probably take it to small claims court and get a judgement without needing to pay for a lawyer.


     The seller is not going to give it willingly and suing them for this amount will cost you 5x more than that. As mentioned, first review the contract to see if it was prorated. If it was then go after your title company, but they also provide you a copy of the closing statement and as a buyer it is also up to you to see these things and question it, not just look at it and say "looks good" which I know many people do.

    IF title company does not step up, then mark this one as a lesson learned. 

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  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    3y
    Quote from @Chris Seveney:
    Quote from @Kevin Sobilo:

    @Beenna Han, first off the seller's statement about using the deposit for unpaid utilities likely does not hold water. The security deposit money belongs to the tenant. So, your state likely requires the tenant to be notified about any deductions from that money and I highly doubt the seller communicated that to the seller.

    The first step I would take is to review the sales contract and make sure that it included language about prorated rents and the turnover of deposit monies. If it did NOT then you could try to hold your agent/broker accountable.

    If it is in the contract, then the agent did their job. A good agent would review the settlement statement (Closing Disclosure) and likely catch this error, but it isn't their main responsibility.

    If it is in the contract and the title agent didn't include it, then you could try to hold the title agent accountable.

    Since this is a small claim, the party at fault might just pay it, or they should carry errors and omissions insurance that could cover it. If they refuse, you can probably take it to small claims court and get a judgement without needing to pay for a lawyer.


     The seller is not going to give it willingly and suing them for this amount will cost you 5x more than that. As mentioned, first review the contract to see if it was prorated. If it was then go after your title company, but they also provide you a copy of the closing statement and as a buyer it is also up to you to see these things and question it, not just look at it and say "looks good" which I know many people do.

    IF title company does not step up, then mark this one as a lesson learned. 

    @Chris Seveney, why would you believe suing anyone for this amount would cost 5x that amount? A small claim in my state is easily handled without a lawyer, can award up to $12,000 and might cost $100-200 to file depending on the amount you're after. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    3y
    Quote from @Beenna Han:

    So I purchased a multi family unit that has an existing tenant in Maryland. I closed the purchase deal on late May, and soon after the closing I realized that the settlement did not include prorated rent (around $300) and tenant security deposit ($1200) related to the existing tenant. 

    Unfortunately my real estate agent and title company did not check that these items should be included at the closing and I, as a first-time home buyer, did not know either at that time. So after the closing, I asked my real estate agent to contact the seller and asked for the prorated rent and tenant security deposit. The seller refused, saying the seller already used up the security deposit because the tenant did not pay utilities thus no security deposit left, and they had some financial loss because closing was delayed because of my mortgage lender's issue thus no prorated rent for me. After this refusal the seller never responded. What should I do? Are the real estate agent or title company responsible for this because they missed to check these items at the closing? or Can I do some small claim for asking these items? 

    1) It would have needed to be in the contract in order to receive those items. If it was not in the contract the seller keeps it. I suspect, if the title company didnt do a proration and transfer, then that is because it was not in the contract.
    2) The time to have noticed this mistake is before closing, not after.



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