Yet Another Landlord/Tennant Question

[normtwofinger]

A friend of mine foolishly gave a landlord the damage deposit for a rental before signing a lease and inspection. Now my friend's circumstances have changed and they no longer need to move into this rental. The prospective landlord already cashed the check and is not being cooperative in returning their money. They were planning on signing a 1 year lease before moving in, so this is not a month to month verbal contract.

Is there something in the Residential Tenancies Act that covers this situation?

And yes I realize this can be frustrating for landlords to have a tennant back out.

[Peanut]

Isn't that the whole point of a deposit? To prevent either party from backing out of the deal.

If I was the landlord I wouldn't be inclined to be cooperative either, they had a verbal deal and your friend paid the deposit - the had a deal in principle. But there may be some room for your friend to negotiate based on the fact they didn't actually sign any contracts.

Like if the landlord had found another renter who was willing to pay more, and then tried to just re-fund your friends deposit saying "oh sorry, circumstances changed and you never signed the lease", meanwhile your friend has stopped looking at places, is planning to move in in the next few weeks, etc. that wouldn't be kosher either.

[Viking Whale]

I don't know the rules in Alberta, but in BC your friend would be out of luck. An exchange of funds is just as binding as signing a tenancy agreement. Since you need to give one month's written notice to end a tenancy agreement as a tenant, the landlord in this situation is actually owed a full month's rent. If the damage deposit was half a month's rent(the maximum allowable in BC) then your buddy is actually getting a "deal" since he would technically owe double.

[photon]

Normally when I get a security deposit from someone it's in combination with signing an agreement and giving keys (and often first month's rent). In that scenario the tenant has clearly taken possession and if they decide to not move in then the rules around that kick in (on a month by month they have to give 30 days notice, the security deposit can go towards unpaid rent, on a 1 year fixed term they're actually responsible until the unit is re-rented up to 1 year).

As said it's a verbal deal since money changed hands, but if the tenant doesn't have keys then I'm not sure if they are considered to have possession or not.

From the landlord's point of view, once they have a security deposit it's rented, so usually they have taken the unit off the market, stopped advertising, told other prospective tenants that it's not available, etc.

If this was for November 1 then the security deposit covers November's rent. There's still time, if it were me I would ask the landlord to refund me if they rent it for November 1, or refund me a partial amount if they rent it sometime in November. If the landlord is keeping the security deposit and it's been re-rented right away (i.e. there's no actual loss on the landlord's part) that probably wouldn't look good.

Service Alberta has a phone number they'll give input on the laws (they're tenant slanted): http://www.servicealberta.ca/contact.cfm

There's also a mediation process which will mediate and make a binding decision that's relatively inexpensive.

In the future giving money to a landlord (or anyone really) where there's some expectation of being able to get it back without something in writing about what the parameters are for getting it back isn't a good idea.

[normtwofinger]

Thanks Photon! Some great points there.

[Dynamic]

I would be a crappy landlord I think cause there is no way I would keep the money. It would suck for the landlord for sure but that's life. Maybe talk real nice and ask for half back?

[Teh_Bandwagoner]

Originally Posted by photon

Normally when I get a security deposit from someone it's in combination with signing an agreement and giving keys (and often first month's rent). In that scenario the tenant has clearly taken possession and if they decide to not move in then the rules around that kick in (on a month by month they have to give 30 days notice, the security deposit can go towards unpaid rent, on a 1 year fixed term they're actually responsible until the unit is re-rented up to 1 year).

Exactly this. Probably the best thing for your friend to do is to help find someone to take the rental unit. If he can get another renter before the 1st (assuming that's when the lease would start) then I believe your friend is legally off the hook and the landlord would be required to return the deposit. Otherwise, your friend may be SOL.

[wretched34]

By law, in Alberta, a landlord has to deliver a damage/security deposit back to a tenant, within 10 business days of the tenancy ending, or provide an invoice for deductions. A landlord can withhold funds from a deposit to cover owed rent if that is stated in the lease, however, in a situation where no lease was ever signed, I am not sure it would stand up in court, for the landlord to withhold the deposit for rent, as this was never clearly defined.

Kind of stupid on both parties here, to be exchanging funds, without a lease being signed. If your friends lease was to begin November 1st, there is not a chance a court would allow the landlord to keep the deposit for rent, when they have plenty of time to find someone else to occupy the rental.

[Frank MetaMusil]

The landlord would be required to refund the damage deposit in full as no move in inspection was signed off on by the tenant. It's a zero sum issue if the tenant gave 30 days notice.

[rohara66]

Originally Posted by Frank MetaMusil

The landlord would be required to refund the damage deposit in full as no move in inspection was signed off on by the tenant. It's a zero sum issue if the tenant gave 30 days notice.

Wouldn't the move in inspection be completed at time of move in on November 1st.

[V]

Originally Posted by Frank MetaMusil

The landlord would be required to refund the damage deposit in full as no move in inspection was signed off on by the tenant. It's a zero sum issue if the tenant gave 30 days notice.

The tenant isn't giving 30 days notice, though. If the landlord stopped advertising for the property and now has to go through that process again I can see quite some difficulty in getting a different tenant in for the 1st. In that case the deposit would count as one month's rent and the agreement ends.

I wouldn't even really want the tenant to find me another tenant, because I prefer to choose who I put in my properties.

[Frank MetaMusil]

Originally Posted by V

The tenant isn't giving 30 days notice, though. If the landlord stopped advertising for the property and now has to go through that process again I can see quite some difficulty in getting a different tenant in for the 1st. In that case the deposit would count as one month's rent and the agreement ends.

I wouldn't even really want the tenant to find me another tenant, because I prefer to choose who I put in my properties.

Which is why I mentioned the damage report. The landlord can't withhold or deduct from a damage deposit without one.

OP's friend will have to file a claim to get it back with RTDRS or through court if the landlord won't return it.

The vacancy rate is 1% in Calgary.

[DuffMan]

If I was your friend, I'd get the keys and go do some damage, maybe spill some red wine on the carpet or put a bag of cement down the toilet, something like that, that would add up to the money lost.

[opendoor]

Originally Posted by Frank MetaMusil

Which is why I mentioned the damage report. The landlord can't withhold or deduct from a damage deposit without one.

OP's friend will have to file a claim to get it back with RTDRS or through court if the landlord won't return it.

The vacancy rate is 1% in Calgary.

The landlord wouldn't be keeping the deposit for damages, it'd be more a case of "agree to let me keep the damage deposit if I can't find a suitable tenant for November 1st or I'll have to sue you for the entire November's rent."

So technically the landlord does have to return the deposit in full, but by that same token the tenant is liable for any rental losses incurred by giving fewer than 1 month's notice.

Like someone else said, it's no different than if a tenant agreed to rent a place and then a couple of weeks before they're to move in the landlord finds someone else who'll pay more and they try to cancel the tenancy.

[Frank MetaMusil]

Originally Posted by opendoor

The landlord wouldn't be keeping the deposit for damages, it'd be more a case of "agree to let me keep the damage deposit if I can't find a suitable tenant for November 1st or I'll have to sue you for the entire November's rent."

So technically the landlord does have to return the deposit in full, but by that same token the tenant is liable for any rental losses incurred by giving fewer than 1 month's notice.

Like someone else said, it's no different than if a tenant agreed to rent a place and then a couple of weeks before they're to move in the landlord finds someone else who'll pay more and they try to cancel the tenancy.

I don't agree, nor do I suspect that argument would hold up to dispute. Part of being a landlord is assuming risk that your property may remain vacant. The guy can't just keep money without any paperwork.

I do agree that paperwork is binding, but that works both ways. Court is really the only legal option at this point.

[Frank MetaMusil]

Nm

[photon]

If the landlord deducts from the security deposit for rent, which is normally allowed, can that still take place if there isn't a walkthrough?

Say tenant pays deposit, signs agreement, gets keys, moves a few things in on the 1st, changes their mind and moves stuff out and leaves key, doesn't want to rent and wants security deposit back. No walkthrough was done, but they got possession but then walked away.

If they still get their full deposit back, that sucks, I'd have to change my process to include first month's rent as well, which sometimes is annoying if someone is renting for a few months in advance.

Or would just having wording around the deposit and under what situations it is refundable before possession be sufficient?

[opendoor]

Originally Posted by Frank MetaMusil

I don't agree, nor do I suspect that argument would hold up to dispute. Part of being a landlord is assuming risk that your property may remain vacant. The guy can't just keep money without any paperwork.

I do agree that paperwork is binding, but that works both ways. Court is really the only legal option at this point.

Verbal agreements for a tenancy are still legally binding in Alberta. Once the money changed hands and the two parties agreed that a tenancy would take place, they agreed to the responsibilities of the landlord/tenant relationship, one of which is that a tenancy cannot be cancelled without the required notice.

And it does go both ways. If the landlord had canceled the tenancy after accepting the deposit and agreeing to rent that place, he'd also be liable even absent a written agreement.

[opendoor]

Originally Posted by photon

If the landlord deducts from the security deposit for rent, which is normally allowed, can that still take place if there isn't a walkthrough?

Say tenant pays deposit, signs agreement, gets keys, moves a few things in on the 1st, changes their mind and moves stuff out and leaves key, doesn't want to rent and wants security deposit back. No walkthrough was done, but they got possession but then walked away.

If they still get their full deposit back, that sucks, I'd have to change my process to include first month's rent as well, which sometimes is annoying if someone is renting for a few months in advance.

Or would just having wording around the deposit and under what situations it is refundable before possession be sufficient?

The absence of a move-in report only eliminates the landlord's ability to deduct for damage and cleaning. It doesn't affect your ability to keep some or all of the deposit to cover for unpaid rent.

[Frank MetaMusil]

Originally Posted by opendoor

The absence of a move-in report only eliminates the landlord's ability to deduct for damage and cleaning. It doesn't affect your ability to keep some or all of the deposit to cover for unpaid rent.

Correct, however the period of rental hasn't come into effect yet. There aren't any arrears of rent.