Previous owner didn't transfer security deposit to new owner (lease, tenant, rental)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I have a situation regarding security deposit if anyone can help.
I recently bought a rental house with tenants living there for 10 years already. The previous owner said there was no written lease(just month-to-month payment) nor security deposit at the closing. When I tried to sign a new lease with the tenants, they showed me an old lease they signed 10 years ago which also had one month amount security deposit paid. Although the lease was valid for 1 year then went on with month-to-month for another 9 years, they claim they never got the deposit back.
I contacted the seller's attorney, he asked for the copy of the lease, then never reply any of my e-mail. According to New Jersey security deposit law, no matter the security deposit has transferred or not, the new owner is responsible for the deposit.
What should I do now? Should I file small court claim to the seller? I don't have other evidence besides the expired old lease. Should I take the loss to credit this amount to the tenants? What if they ask for 10 years interest?
I would appreciate if anyone know how to handle this kind of situation. Many thanks.
When you were purchasing the property, didn't your attorney get a tenant's stement? That would have alerted you to the security deposit issue. You ned to make a written request of the previous owner to explain. They may produce a receipt from the tenants that the security deposit was refunded. If you get nothing, odds are you will need to esculate this and your attorney should be advising you on the proper steps.
But, you technically are the one who now owes the security deposit and any interest required under the law.
Generally speaking, deposits from rentals of this kind are not required too be in interest bearing accounts.
I'm telling you that just so you can take it under advisement when deciding whether or not it will be worth the trouble to pursue the old owner.
This is a requirement in NJ where the OP is located.
After posting this I continued to read the PDF further and admit it MAY not exclude the OP but even if it is required, have to wonder how much interest would be at stake ( certainly only pennies these last few years ) and do say the OP should balance it against the cost and trouble of pursuing the issue in court.
Even with this provision?"
"This subsection shall not apply to persons receiving money for less than 10 rental units
After posting this I continued to read the PDF further and admit it MAY not exclude the OP but even if it is required, have to wonder how much interest would be at stake ( certainly only pennies these last few years ) and do say the OP should balance it against the cost and trouble of pursuing the issue in court.
Even with this provision?"
"This subsection shall not apply to persons receiving money for less than 10 rental units
Yes, the amount of interest on a security deposit is bare minimum. As far as the LL owning fewer than 10 rental units, this further provision applies in NJ:
"Interest-Bearing Bank Account- Landlords who own 10 or more units must place the security deposit in a bank account that pays interest equal to or greater than the interest paid on the bank’s money market accounts. Landlords who own fewer than 10 units need only to place the money in an interest-bearing bank account, there is no specific requirement as to the interest rate."
I have a situation regarding security deposit if anyone can help.
I recently bought a rental house with tenants living there for 10 years already. The previous owner said there was no written lease(just month-to-month payment) nor security deposit at the closing. When I tried to sign a new lease with the tenants, they showed me an old lease they signed 10 years ago which also had one month amount security deposit paid. Although the lease was valid for 1 year then went on with month-to-month for another 9 years, they claim they never got the deposit back.
I contacted the seller's attorney, he asked for the copy of the lease, then never reply any of my e-mail. According to New Jersey security deposit law, no matter the security deposit has transferred or not, the new owner is responsible for the deposit.
What should I do now? Should I file small court claim to the seller? I don't have other evidence besides the expired old lease. Should I take the loss to credit this amount to the tenants? What if they ask for 10 years interest?
I would appreciate if anyone know how to handle this kind of situation. Many thanks.
Maybe I'm assuming again, () but they wouldn't be getting that deposit back until they moved from the house.
They have a lease...but it's on a month to month basis..everything that's in the very first lease from 10 yrs ago is valid....the only difference is you can ask them to move at any time as long as you provide proper notice and you can make changes (rental amount, due date, no pets, water not included..etc.) as long as you give proper notice.
The previous owner owes you this deposit and you owe the tenant the deposit when they move.
I have a situation regarding security deposit if anyone can help.
I recently bought a rental house with tenants living there for 10 years already. The previous owner said there was no written lease(just month-to-month payment) nor security deposit at the closing. When I tried to sign a new lease with the tenants, they showed me an old lease they signed 10 years ago which also had one month amount security deposit paid. Although the lease was valid for 1 year then went on with month-to-month for another 9 years, they claim they never got the deposit back.
I contacted the seller's attorney, he asked for the copy of the lease, then never reply any of my e-mail. According to New Jersey security deposit law, no matter the security deposit has transferred or not, the new owner is responsible for the deposit.
What should I do now? Should I file small court claim to the seller? I don't have other evidence besides the expired old lease. Should I take the loss to credit this amount to the tenants? What if they ask for 10 years interest?
I would appreciate if anyone know how to handle this kind of situation. Many thanks.
I'm wondering if it's worth bothering with. What would one month's rent have been 10 years ago? Couldn't have been huge. And it sounds like you have acquired a great tenant.
I looked up small claims court rules for New Jersey, and lawyers are allowed. So, you'd be wise to hire a lawyer if you go to small claims court, even. I just doubt it would be cost-effective to pay a lawyer to get back whatever amount it is.
I would say that this would be lesson to always require current tenants to sign an estoppel during your contingency period if the current landlord claims there is no written lease. This could have then been addressed during escrow. Now that it is after close of escrow, you will have to decide if it is worth trying to sue the former landlord, or chalking it up to a lesson learned and just absorb the loss yourself.
My attorney(an myself) never asked the tenants about lease and deposit, we assumed the seller followed the law and everything written on the contract were correct. - Galaxie Girl, you are right, I did learn a lesson.
It's probably not worth to go through the legal steps to get the money back. Thanks again, everyone!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
) and do say the OP should balance it against the cost and trouble of pursuing the issue in court.
) but they wouldn't be getting that deposit back until they moved from the house. 
