Security Deposit/Rent Issue after buying in Tax Foreclosure in OH

[Brian H.]

I recently picked up a property in a tax foreclosure in Cuyahoga County in Ohio.  There are good tenants in the building that pay monthly and they were paying to a property management company that was still collecting rents and signing new leases while the property was in foreclosure and had no contact with the owner because he either went MIA or decided to completely neglect the property and let it go.  It seems like the property manager was basically collecting and pocketing rents since there was nowhere for him to send the funds too.  I know in tax foreclosure situations the new owner can become liable for the security deposits.  In this specific situation should the property management be forwarding me the current owners security deposit and/or paying me a pro-rated amount for the current month collected if I acquired the property in the 1st week of the month and rent was already paid for the full month?  If I am not entitled to the money by law is there any harm in asking him for the security deposit and pro-rated amount of rent for the month that was being charged or having my tenants nicely ask for their deposit and/or pro-rated rent back for the month they had already paid in advance?

Thanks for your time

[Will Fraser]

Hi @Brian H., you've found quite the sticky puzzle here.

Let's start with the PM -- PMs cannot simply pocket a security deposit (well, um . . . should not).  There are strict accounting requirements for security deposits on anyone who holds them and what should absolutely be the case is this:  if the PM held a deposit for the tenant, they should transfer it to you right away so that you can hold it according to the local Tenant-Landlord Act requirements, your lease requirements, etc.

Regarding the partial rent for the month you purchased it -- they should pay that amount to you, too. 

I would approach the PM first off, and only involve the tenant in that pursuit if needed down the road.