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Getting a Holding Deposit Back in California When You Haven't Signed A Lease

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  • 07-29-2007, 02:06 PM
    swiss_alps
    Getting a Holding Deposit Back in California When You Haven't Signed A Lease
    Hi all,

    My boyfriend and I are moving to San Francisco, and we found what we thought would be the perfect place after a week of looking. He visited the apartment in person, I was unable to take the time off work, so stayed and packed. We both agreed when our application was approved that it would be a good option. Before we found out about any of our other applications, we sent in a holding deposit equal to the total amount of the security deposit for the apartment. The understanding was when we move in, the holding deposit will count towards the deposit.

    We have not yet signed a lease, nor paid the first month's rent. My boyfriend, who has been dealing with the rental company, rather stupidly did not inquire what portion of the holding deposit is refundable.

    We just found out that we were approved for a cheaper, larger, nicer apartment that we didn't think we would qualify for. We'd like to take it.

    Since we haven't signed a lease, are we still liable for the first month's rent? What are our obligations to this landlord? How much of the holding deposit can he retain? What must be refunded, and on what deadlines? Are we in a stronger position because we have not signed the lease, nor taken up residence in the apartment? Will we have to sue in small claims court to get anything back? Since the holding deposit was so big,
    we need as much of it as possible to make a deposit on the other place, if we can.

    IF we have to, we can take this place, it's just that for a variety of reasons, our other option would be better. It was silly of both of us to be so hasty in sending the deposit -- but SF is a tough rental market, and the rental company said we might lose the apartment if we didn't send the deposit immediately.

    Thanks for your help.
  • 07-29-2007, 02:31 PM
    Just Breath
    Re: Getting a holding deposit back in CA when you haven't signed a lease
    I'm not familiar with California's landlord/tenant laws, but as a former apartment manager, I can tell you that the purpose of the holding deposit is to compensate the landlord from any loss that might occur as a result of you NOT signing the lease. When you placed your deposit, the LL took the unit off the market. If you move in as agreed, then the deposit is applied to your security deposit.....if you don't, then the landlord keeps it to offset his loss caused by taking the unit off the market for you.

    You might just start by calling the property owner and ASKING them if you are entitled to any refund of your holding deposit if you don't hold up your end of the agreement.
  • 07-29-2007, 03:08 PM
    swiss_alps
    Re: Getting a holding deposit back in CA when you haven't signed a lease
    Quote:

    Quoting Just Breath
    View Post
    I'm not familiar with California's landlord/tenant laws, but as a former apartment manager, I can tell you that the purpose of the holding deposit is to compensate the landlord from any loss that might occur as a result of you NOT signing the lease. When you placed your deposit, the LL took the unit off the market. If you move in as agreed, then the deposit is applied to your security deposit.....if you don't, then the landlord keeps it to offset his loss caused by taking the unit off the market for you.

    You might just start by calling the property owner and ASKING them if you are entitled to any refund of your holding deposit if you don't hold up your end of the agreement.

    I understand that -- but normally, holding deposits are SIGNIFICANTLY less than the total security deposit for an apartment. I also understand not moving in is unfair to the landlord because it carries an opportunity cost to him -- and I'm prepared to pay some kind of penalty for backing out at this stage. But him keeping our entire security deposit when we've never signed a lease and never moved in doesn't seem fair. The entire deposit we were asked to pay is well over $1000; most holding deposits are far less.

    Obviously we're going to talk to the apartment rental company about this -- my boyfriend should have asked what portion of the holding deposit was refundable before he put down such a large amount of money. But before we have that conversation, I want to know what my rights are under applicable state and city laws. That's my question: what are our legal obligations and rights in this situation? It doesn't make sense to have that conversation with our would-be landlord until we know what the law says.
  • 07-29-2007, 05:20 PM
    garciaim
    Re: Getting a holding deposit back in CA when you haven't signed a lease
    According to the California Department of Consumer Affairs,
    Quote:

    Quoting Holding Deposit
    Sometimes, the tenant and the landlord will agree that the tenant will rent the unit, but the tenant cannot move in immediately. In this situation, the landlord may ask the tenant for a holding deposit. A holding deposit is a deposit to hold the rental unit for a stated period of time until the tenant pays the first month's rent and any security deposit. During this period, the landlord agrees not to rent the unit to anyone else. If the tenant changes his or her mind about moving in, the landlord may keep at least some of the holding deposit.

    Ask the following questions before you pay a holding deposit:
    • Will the deposit be applied to the first month's rent? If so, ask the landlord for a deposit receipt stating this. Applying the deposit to the first month's rent is a common practice.

    • Is any part of the holding deposit refundable if you change your mind about renting? As a general rule, if you change your mind, the landlord can keep some - and perhaps all - of your holding deposit. The amount that the landlord can keep depends on the costs that the landlord has incurred because you changed your mind - for example, additional advertising costs and lost rent.

    You may also lose your deposit even if the reason you can't rent is not your fault - for example, if you lose your job and cannot afford the rental unit.

    If you and the landlord agree that all or part of the deposit will be refunded to you in the event that you change your mind or can't move in make sure that the written receipt clearly states your agreement.

    A holding deposit merely guarantees that the landlord will not rent the unit to another person for a stated period of time. The holding deposit doesn't give the tenant the right to move into the rental unit. The tenant must first pay the first month's rent and all other required deposits within the holding period. Otherwise, the landlord can rent the unit to another person and keep all or part of the holding deposit.

    Suppose that the landlord rents to somebody else during the period for which you've paid a holding deposit, and you are still willing and able to move in. The landlord should, at a minimum, return the entire holding deposit to you. You may also want to talk with an attorney, legal aid organization, tenant-landlord program, or housing clinic about whether the landlord may be responsible for other costs that you may incur because of the loss of the rental unit.

    If you give the landlord a holding deposit when you submit the rental application, but the landlord does not accept you as a tenant, the landlord must return your entire holding deposit to you.

  • 07-29-2007, 06:30 PM
    swiss_alps
    Re: Getting a Holding Deposit Back in California When You Haven't Signed A Lease
    Thanks for that link -- it explains a lot.

    "As a general rule, if you change your mind, the landlord can keep some - and perhaps all - of your holding deposit. The amount that the landlord can keep depends on the costs that the landlord has incurred because you changed your mind - for example, additional advertising costs and lost rent."

    So does this mean that he can bill us for actual costs associated with renting the apartment, but not for anything else? The landlord has to give an itemized list? And presumably, if we find new tenants or if one of the other approved tenants wants to move in immediately, we could get back our whole holding deposit?
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