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Lucy, Esq.
Lucy, Esq., Lawyer
Category: Consumer Protection Law
Satisfied Customers: 29312
Experience:  Lawyer
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In the state of Colorado: I placed a $2k "holding deposit"

Customer Question

In the state of Colorado: I placed a $2k "holding deposit" (Nov 3) on a house with a verbal agreement to rent. At the time, it was explained that $200 was a pet deposit. Upon receiving the rental agreement (Nov 9), I/we realized there were some stipulations that were unworkable and "dealbreakers", i.e. the deposit was just that, nothing towards first months rent making move in $3800 and giving the landlord direct access to my bank account for automatic withdrawal. In a recorded phone conversation (Nov 11), the potential landlord acknowledged and apologized for not being clearer on these details, but insists that they are "dealbreakers". Further, he will be removing $480 from the deposit ($60x8days) from the time of the deposit to the date of cancellation.
Additionally: The house is still (as of Nov 12) not ready for move in and was never taken off the market (ad placed on craigslist Oct 5 still active as of Nov 12). Your thoughts please and thank you in advance.
Submitted: 1 year ago.
Category: Consumer Protection Law
Expert:  Lucy, Esq. replied 1 year ago.

Hi,

I'm Lucy, and I'd be happy to answer your questions today. I'm sorry to hear about your situation.

A holding deposit is money paid by a tenant to the landlord not to rent the property to anyone else. When the tenant signs a lease, yes, that money is usually converted to a security deposit. However, if the tenant cancels for any reason, a holding deposit is forfeited as long as the landlord did not rent the property to anyone else. He's legally not required to return any of it. Even leaving it on Craigslist wouldn't mean he had to return the money, because he fulfilled his end of the bargain by not renting the place to anyone else.

You would have a stronger claim to that money if it was a security deposit, because you never signed the lease. The problem here is that there was no meeting of the minds. He didn't tell you about essential clauses that he was going to put into the lease, and which are not so standard that you should've expected to know to ask about them. If he's refusing to negotiate terms of the lease that he didn't tell you about, then the entire agreement fails, and he has no claim to keep any of the money you gave him. But that argument would support you much more strongly if you don't have anything in writing that calls that money a holding deposit.