I bought a rental house with an existing tenant.

I Bought a Rental House with and Existing Tenant.


I bought a rental house about 5 months ago that had an existing tenant. I was told by the seller that the tenant had no security deposit. The tenant is now leaving and claims to have a $600 deposit that he wants returned. Who is responsible for returning the deposit?


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? The original should have been turned over to you upon close of escrow. 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 amendment or addendum 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.

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 collect the deposit amount from the seller.

If, by chance, there is no written agreement, it could be a bigger problem because it will be the word of the tenant against the word of the seller.

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. Of course, return of the deposit and/or an accounting for any portion not being returned must be provided the tenant within the time required by your state’s law.

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Is There a Max Amount on Security Deposits?


I am interested to know if there is a max on what a landlord can charge for security deposits and for performing credit checks.

Most states limit the amount of deposits that can be collected and there can be serious penalties for violating the rules. Although a few states have no statute limit, the maximum allowed varies from one to two times the monthly rent in most states. Most states do not allow landlords to avoid limitations by calling the amount of funds something other than a security deposit. You need to check the landlord-tenant law of your state.

Some states have specific limits by statute regarding the amount that can be charged for credit reports. Other states limit the charge to the actual cost of obtaining the reports from outside vendors. However, in most states if the matter were to come before the court, the requirement is that the amount be reasonable, taking into account your cost for a report and the time required for you to process it. Typically, $25 to $40 is acceptable. Experienced landlords or property managers in the area of your property should be able to tell you what is acceptable.

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When a Contractor Does the Job incorrectly.


When a contractor does the job incorrectly, is it easier to have the job corrected when the contractor is licensed than when he is not?


One of the many reasons to utilize licensed contractors is that it is often easier to resolve such problems. For a licensed contractor, one can often get satisfaction through the state agency that licenses and regulates contractors. Most states
require that licensees be insured (which protects you against certain liabilities). Many states provide for a recovery fund that covers consumers and/or require that licensees be bonded.

If the work was not up to standards or if there was any fraud involved, the contractor, whether licensed or unlicensed will often resolve the problem rather than have the owner file a complaint with the state contractor’s board, after which the matter will be on his record or even result in suspension or loss of his license. The degree of help one can get varies among the states. If all else fails, one can still sue the licensed contractor. Of course, one can always file suit against any contractor, licensed or unlicensed, but, lawsuits take time and money even if involving an amount of money that can be done in small claims court or a similar level of court in states which don’t call them small claims court.

Be aware that many states severely limit the type of work (e.g., no electrical or gas modifications) and the maximum dollar size of the job (typically $1,000 or  less) that unlicensed contractors can legally perform. Be sure to check the law
of your state if you are considering use of an unlicensed contractor. Usually, one would not be able to utilize the contractor licensing agency to deal with an unlicensed contractor when the work done does not require a license.

If you are considering withholding payments in a dispute with a contractor, be sure that you understand mechanic’s lien issues.

It is important to always use care when selecting a contractor. Due diligence includes verifying that (1) the contractor is properly licensed for the particular tasks associated with the project if required by law, (2) there have been no unresolved complaints filed against him with the BBB or, if licensed, by the licensing agency, (3) the contractor carries adequate liability insurance and, if the contractor has employees, the required workers’ compensation insurance, and (4)
prior customers have been satisfied. For detailed discussions about this subject see the LandlordOnline.com “9 Steps to Avoiding Problems When Hiring a Contractor” Mini Training Guide.

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