Any Landlords out there?? Need advice
 

Ok so i need some advice.. I have condo in jersey that i just started to rent out. I had some possible tenants come and look at the place. One couple loved it and asked me on the spot if they could put a $400 cash deposit down and have me "hold it" for them.
I agreed under the conditions that their background check went smoothly. We signed a little contract that i wrote up that basically said that if the background check worked out that i was going to rent the property to them for 12 months starting July 1st and that they put down a $400 cash deposit and what not.
So after i tell them that everything is o.k. to go i don't hear back from them for about a week. Then they get in touch with me and tell me that they need to move the move in date back to August 1. I say ok as long as i have some kind of commitment from them which would be the remainder of the security deposit and signing the official lease.
So i still haven't hear back from them . My main question is, if they say that they don't want to rent the property any more do i still have to give them the $400 back??

Sorry if it's a little confusing...

No. the deposit was to hold the place and i assume would go towards rent once they moved in. If they dont move in, and have stopped you from renting to other possible tenants, you have the right to keep the deposit.

Actually the deposit was to go towards the security deposit. That was stated in the contract that we wrote up. Does that make a big difference?

not at all.... if the deposit was to hold the place, and they don't move in, the deposit is yours.... plain and simple

deposit won't be all yours (or rather won't be worth the hassle), if you decide to allow them to move in august 1st

nope. you held the place for them. If they dont move in, you keep the $$. Like i said, usually money taken to "hold" a place stops you from possibly renting to others. So you would be out that money otherwise.

I rent out quite a few commercial condo units on behalf of my father and it's always PITA when things like this come up.
But unless your contract has a line stating about "that" specific deposit, you will have to return the deposit.
Tenants are free to shop around until they sign a contract, and so do you.
Same concept as leaving a deposit for the car at the dealer. You don't lose your deposit when you back out of the deal, do you?

However condo rent is a live asset and you are losing money every day if it is not rented, so I do NOT take any deposit to hold the place. Rather, I take the signed contract to hold a place, and their lease starts from the signed date regardless of their moving in date UNLESS we come to an agreement on later lease start date. However, that doesn't mean they do not have to pay up any security deposit they owe me for the lease contract.

You must know this. DO NOT EVER NEGOCIATE WITH IFFY TENANTS. People change their mind all the time and you do not want to waste your mortgage waiting for those suckers.

Oh yea. It makes whole lot difference. If things were done verbally, it doesn't mean shit in the court. I don't know where people are getting this info of your right to "keep" the deposit.

the contract specifically says they gave me a $400 cash deposit that is going towards their security.

It sounds like it could be argued that the $400 was an advance on the security deposit required at contract execution. If they decide not to move in, then no security is required from them and the $400 would have to be returned.

Security deposits get returned, minus any amount used for repairs. In this case, there are no repairs to deduct.

i made the assumption that the hold deposit stated in writing that it was to hold the place and go towards the sec deposit upon moving in. If they didn't move in, the hold deposit is forfeited.

Exactly.
Just prepare a document to have them locked in.

It all depends on how the contract was written. Scan it, block out names, addresses, and phone numbers (and any other such information) and post it up. That's the best way for people on the boards to give you advice IMO.

This.

You're obviously making this up as you go, which is asking for trouble. IMO you should consider your lost rent while these people dragged their feet your first (and relatively inexpensive) lesson and give back the security deposit and follow jl's advice going forward.

Is the prospect of keeping that $400 really worth the hassle of defending yourself in small claims court where you probably have, at best, a 50/50 chance of winning and, at worst, could possibly be assessed treble damages ($400 x 3 = $1200), attorneys fees and costs (New Jersey law is extremely pro-tenant and there are specific laws regarding failure to return a security deposit that might apply to you)? I think the answer is obvious.

Good luck finding some serious tenants.

As long as you never said the deposit was refundable, the money is yours, even if it isn't the entire amount. Just asked my dad (he used to have a bunch of rental houses) and this was his answer. He's been to court over things with tenants before where the question of the deposit comes up, and he said invariably the court has ruled it to be his. For future you may want to get something written up (even if you just do it by hand) expressing the amount you receive and the fact that it is under no circumstances refundable (provided you are consistent with whatever agreement that necessitated the cash exchange)

I'm getting on to this late but as Zephyr correctly mentioned NJ is pro-tenant. If you do not have it specifically in writing that they will forfeit the $400 if they do not complete and sign a one year lease as of July 1st/August 1st then you can not keep the money. If you have signed a contract saying that you will hold the property for them until August 1st then you must do so or risk breach of contract.

If you didn't already put the extension in writing then don't. Continue to show the property and if you find someone you are happy with then sign the new tenant and refund the $400 deposit to the original tenants.

Two ways your contract could have gone about this:
1) Saying that the $400 was non-refundable, and/or
2) Specifying what the $400 was for (that is, to hold the premise exclusively for their benefit -- basically a $400 option to lease).

Otherwise, your contract probably creates sufficient ambiguity as to what the $400 was intended to cover ...

op, if you want to cover your ass, use a doc like the one attached

although you SHOULD keep it i don't believe that you CAN unless they signed something saying it was a non-refundable deposit to reserve the apartment.