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socallegalwork, Attorney
Category: Landlord-Tenant
Satisfied Customers: 104
Experience:  Attorney and licensed real estate broker with over twelve years of experience, specializing in landlord/tenant matters.
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A prospective tenant gave me a deposit to rent a store front

Customer Question

A prospective tenant gave me a deposit to rent a store front space on a Saturday. I asked him if I should take out the FOR RENT sign and he said yes. The same date another prospective tenant came and wanted to rent the space. However, I told the 2nd prospective tenant that the space is already taken. The following Saturday, the first prospective tenant backed out. Should I return the security deposit he gave me? What should I do?
Submitted: 6 months ago.
Category: Landlord-Tenant
Expert:  socallegalwork replied 6 months ago.
Hello. I believe I can assist you.First, did you and the tenant execute a lease? Was anything in writing signed by the prospective tenant with respect to the deposit that was given?
Customer: replied 6 months ago.
No. I promised to meet with him to sign the lease.
Customer: replied 6 months ago.
He gave me a check for $650 as it is the one month's rent for the space.
Expert:  socallegalwork replied 6 months ago.
Okay. What was the understood purpose of the deposit? Was it to be the security deposit?
Customer: replied 6 months ago.
Security deposit to save the space. He promised to give me the first month's rent a week prior to May 1st.
Expert:  socallegalwork replied 6 months ago.
Okay. And just so I am clear. He didn't sign any application papers either, correct?
Customer: replied 6 months ago.
Customer: replied 6 months ago.
Are you still there?
Customer: replied 6 months ago.
(Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Expert:  socallegalwork replied 6 months ago.
In the future, I would recommend you have them sign a "Hold Deposit" form wherein they agree the money is non-refundable. I don't know if the prospective tenant has demanded the deposit back. I think you need to be careful, I am not sure you want to go to court over this issue. If the tenant requests the deposit back, you can try and negotiate a compromise (e.g. return 50%). You can explain that the deposit was an earnest deposit and his actions have caused you some damage. You lost at least one prospective tenant and may cost you a certain amount to re-advertise, etc. In the future I would not hold any property unless the prospective tenant is willing to sign a form stating the deposit is an earnest deposit and he will lose the deposit if he backs out.
Customer: replied 6 months ago.
He demanding the return of his deposit. I do not know if I should or charge him a week fee prorated based on the rent. Is that ok to do?
Expert:  socallegalwork replied 6 months ago.
You don't have a written contract with the prospective tenant. You can't charge him any rent. That is really the heart of the problem. I would state my case, that you have suffered damages, and see if you can work out a compromise. If you cannot reach agreement, your best course is probably to refund the deposit (to avoid possible statutory penalties if he bring ssuit to recover the deposit) and if you feel you suffered damages, you can pursue the matter in small claims, but the time and money involved may not be worth your while.
Customer: replied 6 months ago.
If I decide to return 50% of the earnest money, am I entitle to do that? He wants the whole amount back to him.
Expert:  socallegalwork replied 6 months ago.
Well, you will need to negotiate with him. I am not sure you are entitled to hold any of it to be frank. It is likely a court will consider it a security deposit and, since, nothing was signed and the property was never occupied it should be returned. One clarification on my previous comments. In the future I would term it a "fee" not a deposit (not just in writing, but also verbally). Deposit implies a right of re-fund as opposed to a "hold fee."

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