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The landlord or the property manager wants a nonrefundable application fee and a security deposit from my client, the tenant, along with his offer to lease the property. Why must the tenant tender a security deposit at this time? Can’t the landlord or the property manager just run the credit check and verify the information in the application to see if the tenant is acceptable without asking for a security deposit at this time? This question addresses practice and procedure. The landlord may do as the question suggests: namely, run the credit verifications without obtaining the security deposit first. Many landlords may want a check for the security deposit in hand as a showing of earnest intent. Sometimes, it is a matter of convenience, especially if the terms of the lease have been negotiated and the parties will sign the lease when the landlord approves the tenant. Sometimes, the landlord needs the check for the security deposit to verify adequate funds.
It is not uncommon for the landlord to ask for a nonrefundable application fee, a check for the security deposit, and a check for the first month’s rent or prorated rent. Whatever procedure is followed, the parties should be clear about the conditions under which the checks are tendered and whether the checks may or may not be deposited pending final execution of the lease. This question also relates to "application deposits." An application deposit is given to the landlord in connection with an application and is refundable to the applicant if the applicant is rejected as a tenant. Application deposits are more typically used in the apartment industry, but may be used in connection with any rental application. If an application deposit is used, the parties will typically sign a written agreement that defines the conditions under which the application deposit is given to the landlord. Under such agreements, the tenant gives the landlord a deposit that will become the security deposit under the lease if the landlord approves the tenant and the parties sign a lease. If the landlord does not approve the tenant, the landlord will return the application deposit. If the landlord approves the tenant and the tenant subsequently refuses to sign a lease with the landlord, the landlord may keep the application deposit (subject to certain conditions). An enforceable agreement for an application deposit will also need to address contemplated lease terms. Application deposits are not application fees. Application fees are typically nonrefundable fees used to pay the administrative expenses related to a landlord’s review and verification of an application. My client receives poor service from his landlord. He wants to buy a house and I have found him one he wants to buy. It is a good deal. My client has eight months left on his lease ($1,000 a month). My client is willing to give up the security deposit. Do I have any exposure if I recommend that he buy the property and move-out of the rental unit? Under these facts, yes. If you advise the tenant to take a certain course of action under the lease, you are moving into the unauthorized practice of law. The Real Estate License Law prohibits a broker from inducing or attempting to induce a party to a contract or lease to break the contract for the purposes of substituting a new contract in its place. Your actions may violate the Real Estate License Law. Finally, the landlord may bring an interference action against you. You have only one choice in this scenario–tell your client to seek the assistance of counsel before he agrees to buy the property or breach the lease.
I have terminated my management agreement with my property manager, but my property manager is charging "remaining management fees." Why? Most management agreements detail what amounts, if any, will be due the manager upon termination. It is not uncommon for a manager to be paid a percentage of rents under a lease. Consider a situation in which a manager procures a tenant under a one-year lease and, one month after the lease begins, the owner terminates the management agreement. It is not uncommon for the management agreement to state that the owner will pay the manager the amount the manager would have otherwise been entitled to receive had the management agreement remained in effect through the end of the lease. Such a clause allows the manager to be compensated for procuring the tenant and permits the owner to terminate the agreement. Of course, all fees payable to real estate brokers are negotiable.
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