What to do about a security deposit if my tenant cancels their lease?

I am landlord and my tenant had just informed me that he needs to cancel the lease agreement. He still has 3 months on it. I am also holding 3 months security deposit. He will return the keys and vacate the home and I intend to market it as soon as I receive the keys. Our lease is a standard car lease agreement which a under provision a states that I can withhold from security deposit any lost rent due to breach of lease agreement. Do I need to write up the cancellation agreement before I can use the security deposit proceeds and what would be the safest way for me to proceed?

Asked on March 21, 2012 under Real Estate Law, California

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

The best way to handle the situation that you have is to draft up a termination agreement with your soon to be former tenant where you agree to market the unit to rent out setting forth the amount of the security deposit and amount that would be owed to you from the security deposit. Have the termination agreement signed by you and the soon to be former tenant each keeping a copy of it.

Assuming you rent out the property within the next three months, the former tenant may be entitled to a refund from you. I would withdraw the security deposit as it becomes due for unpaid rent to pay yourself on a month to month basis. I would not do it all at once.


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