Deposits on holding rentals

[Brian Ellis]

Hello BP,

Might be a dumb question, but can you ask for a non-refundable deposit to hold a rental for somebody here in MA?

[Erik W.]

As @Steve Vaughan mentioned, wording can be important...or not.  Depends on your state's laws and your judge if it goes to court.  The word "deposit" holds certain specific legal connotations in some areas of the country.  For example, a deposit is typically refundable unless you can PROVE damages.  How can you PROVE, in court, that someone else would have moved in?  Odds are, you cannot.  Therefore, the deposit would be refundable.  Yes, even if you say "non-refundable".  The law will override your signed agreement.  So, I highly recommend calling it something other than a deposit.

I used a Holding FEE agreement.  The FEE is 50% of one month's rent, I will hold for up to 2 weeks.  If they pay all additional move-in funds (1st month's rent, balance of security deposit, pet FEE), then the Holding FEE is applied to their Security Deposit.  The FEE is just that: I am charging them for time.  They need time.  I let them pay me for that time, but waive it IF they move-in as agreed.

Also, my Holding FEE agreement specifies the following:

1) Non-refundable, for ANY reason.  ANY reason.  Dear old Aunt Tilly died?  Lost your job?  Broke up with your BF/GF?  Got cancer?  The reason doesn't matter.  Non-refundable means just that...non-refundable.

2) Must maintain income of at least 90% of what was verified at the time of application, so if the DID lose their job then I can keep the fee and still go find someone else who won't be broke in 2 weeks to rent to.  

3) Must stay in good standing with current landlord thru the end of their current lease.  This eliminates the folks who are getting evicted but the current land lord hasn't filed yet.  I've had a couple of these where they stiff their outgoing land lord and then still expect me to rent to them.  Nope.  This also helps when the current LL gives you a glowing reference for a bad tenant (i.e. lies to you) to get rid of them.

4) All tenant-paid utilities switched into their name as of the move-in date.  We get an email from the utility company once this is set up, but you may have to call or have them bring a receipt showing the service change-over date.

Bottom line: You must RE-VERIFY their income and land lord history 1-2 days before you sign the lease.

If they fail to comply with ANY of the above provisions for ANY reason, the fee is kept as liquidated damages and no refund.