Landlord Purchased Rental Home With Existing Tenants.
Question
I bought a rental home about 4 months ago that had existing tenants. I was told by the seller that the tenant had no security deposit. The tenant’s lease term expired and the tenant vacated the house last week. The tenant now claims to have a $760 security deposit that he wants returned. Who is responsible?
Answer
You need to first determine who is telling the truth. Did you not obtain a copy of the lease agreement prior to buying the property that confirmed what the seller told you? The original should have been turned over to you upon close of escrow, but a copy should be sufficient. Additionally, even when copies of lease agreements are provided by the seller, one should NEVER buy a property occupied by tenants without requiring that each tenant execute an Estoppel Certificate.
If you have a lease agreement copy confirming that there was no deposit, ask the tenant to provide a copy or an addendum or amendment showing something different. If there is a discrepancy, you will need to resolve it by comparing dates of execution and signatures between the documents. If there is only the tenant’s version, you may have to go by that unless the seller is willing to testify differently.
Although it is my understanding from your question that there is a written lease agreement, if there is no written lease agreement, it could be a bigger problem because it will be the word of the tenant against the word of the seller even if the seller testifies.
By law in most, perhaps all states, the current owner is responsible for the deposit even if not given credit for the amount at close of escrow. If there is in fact a deposit you will have to fund any part of it being returned. It would then be up to you to attempt to now collect the entire deposit amount from the seller. Your promise to press a claim of criminal fraud if he refuses to pay might be helpful in collecting without filing a lawsuit, but be certain you have irrefutable proof that he lied before doing so.
Be sure to return the deposit and/or an accounting for any portion not being returned to the tenant within the time required by your state’s law.
Unless adequate documentation was used by the seller, including a detailed move-in checklist that was provided to you by the seller, there will be additional problems if you try to deduct from the deposit any amounts for damages that occurred prior to your documentation of the condition of the property during an inspection following close of escrow.