Security deposit dispute is an avoidable problem

Posted11/13/2020 7:01 AM

Q. My wife and I purchased a four-flat about six months ago. There were four existing tenants and all had written leases except one. We received a credit for the security deposits with the written leases and no security deposit for the one oral lease as the seller told us that tenant had used his security deposit to pay rent a few months prior to our buying the property.

The tenant with the oral lease moved out at the end of October and is now demanding his $1,200 security deposit back. We told him what the seller told us and he denied that ever occurred and that he always paid his rent. We had our attorney contact the seller's attorney, However, it appears the seller has moved and the attorney does not know where he is. The seller is also not responding to emails from his attorney. Now what do we do?


A. File this one away under lessons learned. The gold standard for protecting yourself when purchasing rental property is to obtain, from your seller, estoppel letters from the tenants. These are written statements, signed by the tenants, indicating the amount of rent and security deposit for each unit. Where you have written leases, you can rely on the amount of rent and security deposit indicated in the lease, though sometimes they are not accurate.

Prior to paying this tenant anything, I would demand proof of the security deposit. If he cannot provide such proof, he would likely have a difficult time prevailing in a lawsuit. If he does have proof, you have a problem.

Presuming the former tenant has a valid (at least on paper) claim, you have a claim against the seller but no idea where he is. You could eat up much of that $1,200 trying to locate him and you would likely still need to file a lawsuit and serve him, costing additional funds. No one likes to be taken advantage of, but in this case, I think it's probably best just to move on. In the event the former tenant can provide proof of the security deposit, perhaps you could negotiate a compromise. The former tenant likely is not excited about getting involved with the court system.

Q. My husband and I made an offer to purchase a house a few weeks back and made a $1,000 deposit with the real estate agent. Prior to the seller accepting our offer, we found a house we liked better. We told our real estate agent to cancel our offer and she sent an email to the listing agent canceling the offer. The next day, our agent received a copy of the contract back with the seller's signatures.

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The listing agent told our agent that the seller accepted our offer prior to us canceling. Our agent insists she did not receive anything from the listing agent until the day after she sent the cancellation notice. The sellers are now stating they will not release our deposit back to us.

How do we get our $1,000 back? Or, do have to move forward with this purchase?

A. Contracts 101 states an offer is live until it is accepted, rejected, countered or revoked. Presuming your agent can establish the offer was revoked prior to acceptance by seller, end of conversation. I suppose the seller could argue notice to the listing agent was not notice to them. However, I presume the offer was presented to the listing agent so I don't believe that argument would be successful. Regardless of all that, however, presuming the offer was presented on any of the most commonly used form contracts in this area, there was another way out. Most form contracts provide a five business day attorney review period in which the purchaser's attorney can disapprove the contract for any reason other than price. If you had retained an attorney within the five business day period after seller signed the contract, he/she could have disapproved the contract and there would be nothing to argue about.

Contact a real estate attorney to determine where you stand. If it is determined you have a valid case and seller refuses to release the deposit, file a small claims lawsuit in the county where either the property or the seller is located.

• Send your questions to attorney Tom Resnick, 910 E. Oak St., Lake in the Hills, IL 60156, by email to or call (847) 359-8983.

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