What is the law regarding a holding deposit refund?

I am a property manager and accepted 7 students to rent a home. They gave me a $500 deposit to hold the house until they were ready to rent within 15 days. 1 day before the time to prepare the contract they told me that they changed their minds and will not be renting it. At the time they were accepted I began telling all other prospect renters that the house was rented and didn’t even take names and numbers. I told the students that they will not get the $500 back because of the loss of potential rent for the ower. Now they are demanding the deposit to hold back. What should I do?

Asked on July 20, 2012 under Real Estate Law, California

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Under the laws of all states in this country, if the potential renters did not sign a lease for the rental that you were offering as a property manager and then decided that they were not going to take it as a rental after placing a $500 deposit for it, you are obligated to return the $500 deposit immediately.

Failure to do so could very well subject you and the landlord to a civil action.


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