Tenants forfeiting their security deposit?

Question

I have a tenant that signed a notarized lease for one year, and gave me an $1100 security deposit. They were supposed to move in on July 1st 2016...They just called today and said they wanted to back out. Ive had the check since May 27th, and have turned many,many other applicants down because i had a signed agreement with them...We agreed that they would not move in until July 1st because I had some repairs that needed to be done, to include a new A/C install...

Legally do I have to give them the security check back? My lease states that if they forfeit the contract then they dont get it back, however they have not moved in yet. I feel if I give it back to them, I have go through the whole process again which will take longer to get a tenant, costing me more money cause Im paying the mortgage...

Thoughts???

Dawn Brenengen · Answer

@Chance Cooper In NC you can not double dip.  So, you may keep the deposit to cover any unpaid rent in July if you do not have it rented in July, but if you do get it rented for July 1st, you owe the first tenant the whole deposit.  If you get it rented for July 15th, then you prorate the deposit to cover rent for July 1-14.

Marcia Maynard · Answer

The place was not available to rent until July 1, 2016 because of your need to finish repairs.

You can go back to the other "many, many" applicants and qualify someone else to rent the unit and there is a good chance you will find another qualified applicant who is able to rent by July 1, 2016, since it's only been two weeks since you turned them down.

Let the applicant who signed the lease and paid the deposit know that you will make a good faith effort to qualify another tenant as soon as possible. Although you currently have a binding agreement with them which begins July 1, 2016, don't try to hold them to it. Let them go and  mitigate your damages by finding another tenant as soon as possible. Sure it's inconvenient, but so are a lot of things in life. Karma will be on your side. :-)

Account Closed · Answer

It's my opinion you can keep it.

Assuming your rental is in NC: In NC, a landlord has a duty to mitigate damages if a tenant breaks a lease.  What this means, is that you can charge them rent until you find a suitable tenant, plus your advertising fees, etc.  That can take longer than one month or many months or only one week.  Odds are, though, that it would take at least a month to find a great replacement tenant, and get rent flowing.  That's what I usually figured it would take to get a good replacement tenant.  A good replacement tenant, will probably have to give 30 days notice, etc.  You don't have to take just any tenant, in order to fill the unit more quickly.

What you wrote into your contract, is basically a liquidated damages clause.  You both agreed that if they broke the lease, they would forfeit the deposit.  That is a fair agreement.  Sure, maybe it could have cost them less - but, maybe it could have cost them much more.  And they agreed to that amount being a fair penalty for breaking the lease.

So, I'd keep it.

Here is a reference to NC law on the subject, with references to NC laws:

http://www.nolo.com/legal-encyclopedia/tenants-rig...

Chance Cooper · Answer

Sue K. Thanks for the advice, I did not know that!

Chance

Chance Cooper · Answer

@Marcia Maynard @Chris Ramos Yes, that is my plan. I am going to tell the tenant that they need to send me a notarized letter explaining that they don't plan to move in on the 1st of July before I sign another agreement with someone else.

But, I will try to get somebody else in there and give them their money back. Its the right thing to do, a little more work, but whoever I put in the house I want to make sure there's a good relationship from the start.

Chris Eaker · Answer

There is the legal answer and then there is the real world answer. Legally, they signed a contract with you and are responsible for the full terms and full amount due. In all actuality, if you took them to court to enforce it, I have a hard time thinking a judge would find in your favor since they never moved in. So what I would recommend is tell them that since you took the house off the market and turned down other applicants, you are going to hold their security deposit as damages since you will have to put the house back on the market again.

If you happen to find a new tenant that will move in July 1st, which is the same date they were going to move in, then you can refund their deposit. Otherwise, hold the security deposit.

Chris Ramos · Answer

That's a tough one. I personally would give the funds back and in the future I would make a portion of the deposit be a Consideration for taking the property off the market for such a long period of time. Possibly a separate agreement to your lease.

Another option is to negotiate with them and let them know that you spent time and effort and have a cost of lost opportunity and see if they would meet you in the middle or somewhere that your comfortable with. The potential hassle of keeping their deposit without their consent just seems like a can not worth opening.

Hope this helps.

Tenants forfeiting their security deposit?

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