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Sunday, June 20, 2010

THE RIGHT THING: THE EARLY BIRD LOSES THE DEPOSIT

In late May a reader from Columbus, Ohio, purchased a house. Because the current tenants had a lease running through the end of August, my reader planned to move in on Sept. 1, figuring that this would give the current renters plenty of time to find a new place to live.

At the closing for the house sale, the previous owner gave my reader a copy of the renters' current lease, plus a prorated share of the rent they had paid for May and their original security deposit of $1,295, one month's rent.

The house had been put on the market in mid-April, and at that time the tenants gave 30 days' notice that they intended to move out by the end of May, which they have done.

The sticking point: The lease stipulates that the renters will forfeit their deposit if they move before their lease expires, but the renters have made clear to my reader that they expect their security deposit returned in full.

The former owner told my reader that, if he still owned the house, he would not return their deposit because they had violated the terms of the lease by bringing in a cat and also by moving before the lease expired. My reader's lawyer agrees.

When the renters told the previous owner that they were planning to move, there was no discussion about the return of the security deposit. Since then, however, it has become a major bone of contention between them and the new owner.

"They are driving me crazy with phone calls and text messages," my reader writes.

He figures that the former renters are responsible for repairs to the house that will cost about $400, which should rightly be deducted from the deposit in any case. The question is, what about the rest of the money?

"Do I have to return the security deposit to them, now that they have vacated?," he asks. "I used to own several properties. Now I remember why I got rid of them.

"What is the right thing to do?"

I have often said, in this column and elsewhere, that what's legal and what's ethical aren't always the same thing. In this case, for example, the legalities are clear: As long as the renters weren't misled and the lease clearly states the terms of the agreement, then my reader has no legal obligation to return the money. It's an open-and-shut case.

For him, though, the ethics are obviously foggier. What's the story?

In my opinion this is a case in which the law and the ethics go hand-in-hand. The renters entered into an agreement without coercion, and their landlord lived up to his side of the deal. They should therefore do the same and, since they moved before the lease expired, write off the security deposit. That a new landlord held the lease when they made their early departure has no bearing whatsoever on their obligation to honor their agreement.

My reader is unhappy that the renters feel that they are being dealt with unfairly, and he admits that he feels inclined to give them something back - but is also bothered by "their attitude of entitlement."

However, my reader is not ethically bound to see that everybody feels that they have been dealt with fairly, only to actually deal with everybody fairly. If he chooses to return some portion of the renters' deposit, it will be strictly out of the goodness of his heart, not out of any ethical obligation to do so. Whether or not it's reflected in their attitude, the renters are not entitled to any of the money back.

The renters didn't ask me for advice. If they had, I'd tell them to reread their lease and acknowledge that, by moving before it expired, they forfeited their security deposit. If they hoped to have this section of the lease waived, they should have taken that up with the previous owner.

As for my reader, he's already doing the right thing, even if he's feeling bad about it. If his compassion moves him to return some of the deposit, I hope he'll at least make sure that he keeps enough to cover the cost of the necessary repairs.

"I have always been on the losing end of these situations," my reader tells me, but in this case he doesn't have to be.

His sympathy for his former renters does him credit, but there's nothing wrong with expecting them to honor the lease they signed.

c.2010 The New York Times Syndicate (Distributed by The New York Times Syndicate)

2 comments:

Bill Jacobson said...

Jeffery,

The landlord should hold the deposit to offset the losses he has incurred to the break of the lease - both the $400 and the loss of rent income for the remainder of the lease - May to September - which will dwarf the security deposit.

Ordinarily, the landlord would be required to mitigate his losses by rerenting but even that would very likely eat the remaining security deposit, especially given the chance of rerenting for five months.

The landlord should refer them to the lease terms, tell them to stop contacting him as his decision is final, notify them that any further contact on this matter would be considered harassment. File for a restraining order if they continue.

Bill Jacobson
Cypress, CA

Max said...

In real estate, after :"location,location,location" it is "get it in writing, get it in writing, get it in writing." No ifs, ands, or buts. Real estate transactions require adherence to the written contract or the lease. Period. If not, a smile, word of mouth, and handshake would suffice. This is so clear cut, I am surprised that Mr. Seglin included this issue in an ethics column.

Wize Maxey
Richmond, Va.