Q: My roommates and I gave $ 1,000 deposit with a rental application and then decided not to rent the property. The landlord is refusing to return our $ 1,000. Is that legal?
There are a few landlords in town that will do this, and to get your money back, youâ€™ll have to challenge the landlord, sometimes in court.
They try to justify their actions based on the wording of their application forms. For example, one landlordâ€™s form reads: â€œIf the application is accepted and the resident does not enter into the lease agreement within three (3) days of notification of acceptance, the Fee shall be retained as liquidated damage for holding the premises off the market.â€
In a recent situation with this landlord, the applicants paid $100 for credit checks for four applicants and an additional deposit of $1,000. Within six days of learning their credit was approved, the applicants notified the landlord they would not enter into a lease due to concerns with the property. The landlord has refused to return the deposit, relying on the language in his application.
However, courts will not enforce a liquidated damage clause when the amount is unreasonable and greatly disproportionate to the presumable loss.
In the example, the applicants passed on a lease that was not set to begin for four months. The landlord took the property off the market for less than a week before learning that the applicants would not go forward. The landlord has four months to find other tenants. $1,000 is highly disproportionate to any actual losses the landlord will suffer.
Therefore, it is quite unlikely a court will allow the landlord to get away with this. Hopefully, a written demand from Student Legal Services on behalf of the applicants will solve the problem short of court.
Your best protection is to read every word in the application and make sure it does not contain a forfeiture of any significant deposit. A small fee, such as $25 for each applicant, is customary to pay for the credit check, and this will not be refundable. Donâ€™t expect a landlord to warn you; you have to read the fine print.
Be prepared to hear that if you donâ€™t commit your money, others in line will get the property. Donâ€™t be vulnerable to this pressure. You donâ€™t want to be locked in before youâ€™ve even had time to examine the lease or thoroughly inspect the property. At the time you sign an application, youâ€™ve rarely had that opportunity.
As always, the attorneys at Student Legal Services will help you with most any legal problem.
Kathleen Harward is an attorney and director of Student Legal Services, which provides free legal advice to fee-paying CSU students. Letters and feedback can be sent to firstname.lastname@example.org._