Do I Have To Return Her Holding Deposit?

Question

Woman wanted to rent an apartment. She wrote on her application that her building had been sold and rent was increased. She said she did not want to move but she could not afford new rent. I ran her credit around October 1 and all was good so I told her that she had been accepted. Move-in scheduled for October 17. I received a $500 deposit before I cancelled ads but there was no lease signed--she is Section 8 and inspection was scheduled for October14--tomorrow. She called this evening saying she can now stay in her current unit and wants her money back. Do I have to return her $$ because there was not a signed agreement?

By the way, my next step is to come up with a form that a holding deposit is non-refundable. Better late....

Eric S. · Answer

$500 with no agreement is not worth the possibility that the tenant will sue with free legal representation.

Give the money back and always use a holding deposit that explicitly spells out the terms of the deposit.  I would be happy to share the one that I use with you.

Sam LLoyd · Answer

Looks like it's unanimous, but here's my 2 cents anyway.  I never take an ad down until I have the security deposit and a signed lease.  That way everything is very clear.  I also never give them keys until I have 1st month rent.  Making this distinction has helped a lot, and yes, I arrived at this procedure the hard way.

Minerva Perez · Answer

Usually when you give a deposit to hold an apartment and you never took possession of or signed a lease for, you are entitled to get the entire deposit back, however sometimes the deposit may show the landlord "accepted" you as a tenant. The receipt of the deposit may have created an agreement, but the agreement may only have limited rights rather than being a full lease. In any case you may give back the deposit. Some landlords try to keep some of it, or even all, of the deposit the key if you go to court is what you agreed to, or what seems to be to an objective reasonable person. I would avoid the head ache and give the deposit back.

Michael Boyer · Answer

Ditto, not worth the hassle. Section 8 will also generally qualify you for free legal aid. So i'd give it back and be glad I avoided a flakey potential tenant or larger problem...

And maybe look at the details and timing of your signings to prevent this in the future. Think of it as an opportunity for improvement in your processes. People often act in their own interest, to the detriment of yours. So you have protect yourself..or else you are stuck advertising and showing it again.

I try to keep it super simple. The first month rent and deposit gets you the keys at signing. Keys for the check. No holding a place. If you like it, write a check and sign the lease. Otherwise, we keep showing it.

I don't take money except at the signing. (Adjust as needed for section 8 but avoid a partial payment and get the fuzziness out of the transaction).

And I keep advertising and scheduling showings until someone signs. So this protects you if a prospect backs out or gets cold feet.

Good news, probably a better tenant out there. Best of luck.

Steven J. · Answer

I second what @Jim Sakalis says. You likely have to return it (probably not worth the headache over it). Chalk it up to a lesson in keeping your ad running until a lease is signed and they are in.

Sam LLoyd · Answer

In my experience.... the lower end units tend to have tenants that move quickly.... they don't have a lot of stuff.  They can find a home at the last minute and move in days.  I've never done section 8 myself, but you might do well to just leave the ad up till the last minute.  Have a backup tenant, but make sure they know that they are number two and can still look for places.

Christine Swaidan · Answer

@Eric S. Thank you for your kind offer. I believe I need to rethink the whole policy and come up with a better system. I like the advice given by @Sam LLoyd and @Michael Boyer which eliminates the holding deposit completely.  Not sure how we can make it work with Section 8 but I'll figure it out. Appreciate all of the responses!!

Christine Swaidan · Answer

Hmm. Interesting. I will definitely take the advice to give back $$ and I've already put it back on the market. Appreciate all the good advice and suggestions on how to make my business better.

Do I Have To Return Her Holding Deposit?

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