What to do when tenant breaks lease the day before moving in

Question

Hi Everybody, I am wondering if anyone knows the rules in Colorado when a tenant breaks a lease the day before moving in. The prospective tenants viewed the property and decided they wanted to rent it. They had good references and had been in the current rental for 11 years. I collected their security deposit when they signed the lease three weeks before they were to move in. We agreed the first and last months rent would be due when they moved in. First, last and security is standard in the mountains. The day before they were to move in I met them at the property to collect the rent and give them the keys and they said they didn't want it anymore as they had found a place closer to their work. Now of course they want their security deposit back immediately. Does anyone know if I can keep part of their deposit for the missed rent? I am showing the house this weekend so hopefully it will only be vacant for 2 weeks. Thank you in advance for your help. Charlotte

Roy N. · Answer

@Charlotte RaycraftWhile I do not know the tenancy laws in Colorado specifically - @Jon Holdman could tell whether this applies equally in the Mountains.In the places we operate, if the tenant breaks the lease early s/he, or they, remain obligated for the rent until the property is relet. Conversely, the landlord has an obligation to make best business efforts to secure a new tenant as promptly as possible. Once you relet the property, your present tenant will be released from their obligations.The security deposit is not returned to the Tenant until the end of the tenancy - which, in this case, will be when you re-let the apartment - and then, any deductions for damages, cleaning, utilities, rent arrears, etc. are deducted first.In this situation, I would tell the tenants we will work with them to relet the apartment promptly, but the chances of finding and vetting a qualified tenant in time for July 01, are slim. I would then explain to them their obligations and advise them that, not only will you he holding on to the security deposit until the place is re-rented, they are obligated to pay their rent on-or-before July 01. Now, if the planets do align and you find a tenant for the first of the month, they should consider themselves very fortunate.

Account Closed · Answer

A contract is a contract no matter what state you live in. They signed the Lease !They didn't pay rent so rent for that month will be deducted from the Security Deposit. Normally they would need to give you a 30 day notice (or whatever your state law requires when moving) that they are leaving, but in this case since they didn't move in, you should return the balance of the security deposit. (All but the current months rent)Once again, a contract is a contract. If you had taken the first months rent and they changed their mind you would have kept the first months rent and returned the Security Deposit in full. But in this case, they didn't pay the rent, so you can deduct that rent from the Security Deposit.If you do all this via mail, then yes follow your state law regarding how you used their Security Deposit. If you hand give them the balance of the SD, then have them sign a document that you returned the Security Deposit less Rent.Nancy Neville

Jon Holdman · Answer

First, your process needs some corrections. If you want to hold a property for a tenant, do an agreement with them to hold it. Mine is very, very explicit that the money they give me to hold it (equal to the deposit) is non-refundable. If they sign the lease as stated in this agreement, that money becomes the deposit. If not, I keep it. I only do this for a short time, if the property is vacant.At lease signing, we both sign all the documents, they hand over all money in cash or equivalent (ABSOLUTELY no personal checks), and I hand over the keys. Never pre-sign a lease. That's what creates all this confusion.For good advice that will stand up in court, contact an attorney. THS Law Firm is a local firm that specializes in landlord/tenant law.

Bill S. · Answer

@Charlotte Raycraft look at your lease. Unless it addresses early termination, then follow what @Roy N. said. In the future, collect the 1st month's rent with the SD when you sign the lease. In all likelihood you will end up loosing some money on this deal as their SD won't cover the costs of lost rent and holding costs. Your time is "free" unless it's spelled out otherwise in the lease. Just because they didn't move in doesn't mean you don't have a valid agreement. You may also want to consider the blog post I wrote on Early Termination Fee (ETF). It would help you in your situation. The ETF provides some funds to cover your direct costs associated with releasing a property. Finally, you can not just "keep" the Security Deposit. You must send them an accounting of how it is used no matter what. Colorado law allows for 30 days to return the SD unless the lease specifies otherwise, in which case the law allows for up to 60 days to return it. If you do not send them the accounting, the court can order you to pay tripple the SD deposit back to them even if they owed you the whole amount. Don't for get to send the accounting in a timely manner!

Bill S. · Answer

Personally I've only had grief with holding agreements. I used to do that. I had new tenants back out and threaten to sue me over keeping their holding fee. It was plain and in black and white pretty, much the way @Jon Holdman described.I do as I have stated. Sign the lease and get the SD and rent. They get the keys when the unit is ready on the first day of the lease. I'm not sure where the holding agreement idea came from. I can see using it to protect myself if the former tenants didn't leave and prevented me from delivering the property to the new tenants. I am aware of that and have waited until the old tenants actually vacated prior to getting new tenants when I thought this might be an issue. I think some confusion (or feigned confusion) comes because the tenant's haven't actually paid rent in their minds. When you collect "rent", then I think that solidifies the concept of, it's going to cost you to change your mind.Just my two cents and I'm not saying holding agreements are wrong. It's just my experience and my approach.

Anna Buffkin · Answer

while you have the high ground here, is it worth fighting it? I would make attempts to have them honor their commitment, but if they give push back it may be worth cutting your loses. Today is the 22nd, can you show, vent, and approve a tenant by the 1st. If yes, is the market hot enough to quickly find a new tenant? Do you want to have a tenant that is already flacky and does not see the value in a contract?I would cut your loses unless this is a particularly hard property to rent. Even if the law is on your side, is it worth the money to fight. Kind of like cash or keys in reverse.

Bill S. · Answer

@Charlotte Raycraft yes you can! Don't forget to charge them for any utilities that were to be in the tenant's name if they were in your name during that period of time as well. If you want to twist the knife you might consider deducting a late rent charge for unpaid rent they owe since they technically didn't pay any rent when it was scheduled to do so. Also remember that a June 15 move-in means they would owe for 16 days of rent.Just be sure to line item detail the costs on your accounting form when you send the balance back to them.Don't give anything away to these people just because it worked out ok for you. Remember timid landlords have skinny kids.

Adrian Tilley · Answer

Account ClosedWanted to make sure you saw this correction. You can use the security deposit for unpaid rent. As someone stated above, that probably (depending on lease) continues until you can re-rent the property, assuming that you are being diligent about doing so.

Adrian Tilley · Answer

This is not correct in colorado. Security deposits cannot be used for rent. The terms of the lease will control.

Roy N. · Answer

Account Closed - sorry for the oversight in my initial response, I had forgotten you were also in Colorado.