Who gets the deposit if the tenant backs out of the lease before the commencement date?

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10/22/2014 | Author: Editorial Staff

A tenant for a property I manage entered into a lease with the landlord and paid a security deposit and first month’s rent. The day before the date the lease period began, the tenant notified me that he had changed his mind and no longer wanted to rent the property. The tenant asked me to send the security deposit and first month’s rent to his new address, but the landlord wants to keep the funds. Can the landlord do this?

Maybe. The landlord has an obligation to secure a satisfactory replacement tenant. A tenant may also attempt to locate a replacement tenant. If a satisfactory replacement tenant who can move in by the lease’s commencement date is not found, the landlord may hold the tenant in default and exercise the remedies in Paragraph 27 of the Residential Lease. This may allow the landlord to keep the security deposit and first month’s rent.

On the other hand, if the landlord does find a satisfactory replacement tenant who can move in by the commencement date, the landlord may only deduct from the security deposit and the first month’s rent either a sum agreed to in the lease as a cancellation fee or actual expenses incurred by the landlord in securing the replacement tenant.

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Categories: Legal, Landlords, Renters
Tags: residential lease, renters, tenants, landlord, forms, property management


Kyle Ranne on 10/23/2014

In my opinion, I don’t think it’s about courtesy and common sense.  I don’t think the owner can legally keep any money unless he is financially damaged.  With another tenant ready, willing and able to move in, I don’t see much in the way of financial damage to the owner, except for additional time spent in signing another lease and a few other details, perhaps.  In short, it would be difficult for the owner to explain in court how he was damaged the entire sum of the deposit and a month’s rent.

Shafiq Younes on 10/23/2014

If both parties signed & executed the lease agreement in writing then the tenant is in default by breaching the lease agreement & the landlord can & may keep all the money in hand including but not limited to the deposit.
However, courtesy & common sense shall come to play, for example if there is another tenant lined up ready to move in I don’t see any reason for the landlord keeping the money.

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