Lowered rent now Tenant wants refund from Security Deposit?

Question

Market dictated we lower the rent, now tenant wants the difference refunded from the security deposit.

They are good tenants & he is an accountant, so really into number crunching.

Thoughts?

Linda Weygant · Answer

If your lease states that you are holding last month's rent and security deposit valued as a month's rent, then yes. (ie, tenant pays first and last month's rent at move in plus one month's rent to be held as security against damages).

If your lease states a dollar amount being held as security deposit, then no. (Tenant pays $1500 at move in a security against damages).

If your lease states a dollar amount being held as security deposit, then no.  (Tenant pays $1500 at move in a security against damages).

Jeremy Pakalka · Answer

@Cynthia Dimitroff It is really up to you. If he is a good tenant and pays on time, it might be worth it to keep him happy. I would make sure the security deposit is enough to keep him honest. A happy tenant is always better than a pissed off tenant. I would also probably have him sign a new lease so if market rents go up, you can renegotiate all terms.

Account Closed · Answer

Heck no!  A security deposit is for your security - against possible damage AFTER the tenant moves out.

Tell your tenant, nope, that money is for your security in case of damage or unpaid rent, etc., in the case they do damage or leave without paying the rent.  And, that being a numbers cruncher, you're sure he understands how important that is for someone in business with an investment.

When the market crashed, I was managing an apartment building in Silicon Valley.  Only one tenant asked for a reduction, and we gave it to them until the market rallied.  Neither party ever asked for or considered refunding any of the security deposit.

If I was you, I'd be looking to get rid of this tenant asap.  In my experience, once they feel like they got one over on you, in any way shape or form, they will become a pain in the rear tenant.

But, just say no to refunding any of the security deposit.  If they choose to leave over it, wish them well.

Jill F. · Answer

In Ohio, if you hold more than one month's rent for security deposit for more than 6 months you must pay 5% annual interest on the amount over one month's rent.

Thomas S. · Answer

A lease, regarding security deposit, needs to be worded in such a way as to set a specific amount or be set at the equilivant of one months rent based on the start date of the lease. If it is not then you owe a refund to the tenant or your tenant must be contributing to the deposit each time they are issued a rent increase.

Deposits are generally set and remain fixed for the term of the resident occupancy of the unit.

Your tenant can not have it both ways.

Bryan O. · Answer

@Cynthia Dimitroff I agree with @Linda Weygant. If your lease says your security deposit is equal to 1 month rent, then return the portion that is needed. If it says something like security deposit is $1500, then do not. I never allow my security deposit to be the same as the rent and I make sure that every tenant knows they are 2 completely different things. Without that separation it is too easy for a tenant to forget that the security deposit is NOT the last month's rent payment.

Beau Fannon · Answer

I second @Linda Weygant

Sai T. · Answer

@Rocky V.

Some people never gets happy especially if they are tenant!

Rocky V. · Answer

Security deposit is just that a security deposit to be held until move out.  I don't really see why they should be requesting a refund unless they are moving out.  Tenant should be happy that you are lowering rent.

Deanna McCormick · Answer

kind of a nightmare to figure out when they move,, so you'd have interest on first amount paid for xxx months then interest on changed amount for the next xxx months.. so NOPE the security deposit stays as is .. don't mess with it ...

Lowered rent now Tenant wants refund from Security Deposit?

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