Seller of 3-unit apt says he "used up" the security deposit

[Jeff Groudan]

Hi - we are working to finalize a contract to buy a 3 unit apartment and the contract clearly says that security deposits transfer from seller to buyer.   No question here.  I know the security deposit really belongs to the tenants and needs to transfer to us at the sale.

However, the seller is saying that the tenant in one of the units has not been performing and has accumulated a lot of late fees during the year and he has used the security deposit to pay the late fees and therefore he only intends to transfer 2 of the 3 security deposits.

My question is whether the seller is allowed to use the security deposit in this way and now that he is selling, is he accountable to transfer us a full security deposit?    Ultimately, everything is negotiable but I am trying to understand if there is a black and white rule on this or if a grey area.  

The contract language states security deposits transfer to buyer.

Thx,

   Jeff