Seller doesn't wanna give up deposit

[Oscar Turner]

Hi guys, I am under contract as of today on a multi family property. My issue is the owner is telling me that a fully occupied building doesn't have any deposits left for me to collect at closing. I ask why and he stated that when the tenants were late on their rent he subtracted the late fees out of their deposit. He never evicted any of them. Is this legal? How can he be a passive landlord and keep the deposits? The tenants would make have zero incentive to take care of the properties.