Coming up with the full amount of deposit.
Question
The applicant I had selected for my vacant rental house just told me, prior to our final walk-though inspection in two days, that he has had unexpected problems coming up with the full amount of security deposit and first month’s rent that we had agreed on in the already executed lease agreement. What are my options?
Answer
Occasionally, the selected applicant informs a landlord at the time when security deposit and rent are to be paid that he/she is short some of the funds due. In such a case, a landlord has basically two choices, assuming that the lease agreement included adequate clauses and the selected applicant has not been given legal possession.
If the lease agreement has words that make its commencement contingent upon receipt of all funds due, you can tell him/her that you will have to select another applicant unless he/she can come up with the funds before the agreed deadline. Many times the potential tenant will miraculously find the required funds after all. If that doesn’t work and you prefer, for some reason (e.g., he/she was the only qualified applicant), to allow possession upon payment of less than the total funds due, there are certain ways to minimize the risks.
First, be sure that you require execution of an addendum to the lease that clearly states the agreed schedule of payment of the deficiency and that failure to perform is a material default of the lease resulting in its termination.
Second, be sure that the addendum clearly states that the unpaid portion is rent rather than part of the security deposit. The reason why this is important is that it is usually easier and faster to obtain an eviction for non-payment of rent than for most other defaults.
Possession should never be given until all funds have been received (either cash or bank check). If the selected applicants have been given legal possession (e.g., by giving them a key or allowing them to store personal property on the rental property) the landlord might have to proceed with eviction if the parties cannot come to agreement regarding resolution of the problem.