Is my landlord trying to steal my security deposit?

My landlord is about to lose the building I am renting an apartment in. My contract is not up until May 2009 and I have paid a one month security deposit when I signed the contract.

He is now going to give up the building either this week or next week. He called me today asking me to make the November rent check out to his name and not the normal corporate name I usually make it out to.

Obviously this is shady. My plan is to have him apply my security deposit toward the November rent.

The question are:
1. What to do if he says no? Can I legally have him apply my rent to the November rent considering that he is holding one months rent and wont be around at the end of the contract to refund my deposit
2. Will having him apply my security deposit toward the November rent avoid a liability if the bank takes over before November?

I’m sure this had happened to others, but wasn’t sure what the best move is.

What does the contract say? Is he selling the building or the bank seizing it?

Since you said 'lose' the apartment, I'm going to assume bank takeover.
Landlord is wanting to change the payment name and is losing the building, definitely sounds like trouble (take payment and run).
If everything was normal, what would it cost you if you were a couple weeks late with rent?
I'd give him the run around till you know what's going down.
{If assumption is wrong then ignore comments}

If the corporation holding the property is insolvent, then I wouldn't be handing him a check for another month's rent without assurance that your security deposit is still intact. The $25 late fee or whatever it may be is a much better choice than gambling whether or not you're going to get your SD back. I would wait and find out more.

Why assume the worst? Ask your landlord who the new owner is and what is going to happen to you security deposit. If he says the new owner will assume the contract and receive the deposit, then call the new owner to verify. If the new owner contradicts his statements, then you have grounds for withholding next months rent to apply the security deposit as rent. As for the possibility of eviction due to non-payment of rent:

1) it takes time for landlord to complete the eviction process. Presumably, he will lose the building before this happens.

2) you can state to the judge in court that he lied about the new owner assuming the contract and receiving the deposit.

Even if your contract stipulates that the security deposit cannot be applied to the last month of rent, it surely does not indicate that you should make a check personally payable to your landlord. If you don't pay the last month's rent, what is he going to do? You're already leaving the premises and the corporation may very well be insolent. It seems he doesn't have much means of recourse, and taking you to court for November's rent while holding onto your security deposit in the same amount would not be a logical or rational move on his part. Banks are not in the business of being landlords, so when the bank takes over you very well may have to move; if not, they likely aren't going to care what your standing was with the old/present landlord. I say don't pay, ask him to apply the security deposit to November rent, and if he says no, still don't pay.

I'd be very, very careful here - is there a housing office in your city you can talk to? My apartment building was sold midway through my lease to an estate management company, and my deposit disappeared into the ether. If your current landlord won't accept the deposit as rent, then ask him to refund it before giving him his check. Also be sure to talk to the new owners, if you know who they are, to be sure they will honor your existing lease. good luck!

swandown said: I don't know about the whole security deposit issue, but I know for darn sure that I wouldn't give my rent check directly to him. Then what happens when the Corporation comes after you for back rent and you can't prove that you paid it??

Bingo. Tell him that you will not change anything unless he tells you to do so in writing.

Why would the landlord give him his security deposit back? If the building changes owners, the landlord is legally obligated to hand over the security deposit to the new owner.

okay here is some more info

I'm located in Chicago.
One apartment was sold a year ago, 2 are rented and 3 are not completely built from the inside.

From what I've found the amount of time to eviction can vary. Usually the landlord is not a stickler about getting his rent on the 1st of each month. He has guaranteed that he is losing the building, he said its just a matter of him and the bank trying to agree what to do with his other buildings and personal credit card debt (that he took on to support the building). He also said that the bank plans to hold on to the property because its the nicest building in the area (which it is) and doesn't plan to evict anyone- which may just be lies.

I'm having my contract faxed over and will see what it said. I don't plan on giving him a single cent, but I'm sure he wont be returning my security deposit to me (not sure if it goes to the bank, but I doubt it).

I didn't know if I should just keep giving him the run around for a few days or tell him he has the deposit to use as rent and if he doesn't like it we can discuss the whole personal check issue with the bank...im sure they wont like it.

As someone who has successfully sued their landlord before, I strongly recommend sticking to all conditions of the lease, including who you send the check to, etc. If you deviate from the lease at all you have little recourse to get anything back in court. If you honor the lease it will be difficult for them to evict you. It takes a long time just to evict deadbeats, let alone upstanding citizens. The landlord-tennant laws in your state will dictate when he must give you back the SD, but I know in VA it is 45 days.

*YMMV depending on your state, I am in VA*

bigmarley4 said: If you honor the lease it will be difficult for them to evict you.In the OP's context, this statement is inaccurate. Lenders generally make their loans such that all leases on the property become subordinate to the mortgages, so that in the event of a foreclosure all junior encumbrances on the property, such as leases, are extinguished. In such a case the tenant's strict compliance with the terms of his/her lease is irrelevant and all tenants become tenants at sufferance, which allows the new property owners to evict them, completely renegotiate all terms of the lease and/or charge tenants very, very high daily lease rates, etc...

Now, some states have statutorily modified the above and only allow evictions to take place if there is a "good cause" to evict, with foreclosure not being deemed a good cause. Even in those states, however, the "good cause" requirement often does not apply to small landlords and/or small lenders though. Further, even in "good cause" eviction states tenants are often required to formally contest evictions to protect their rights, which many fail to do because they don't know how to go about doing it.

Here's what I would do if I was in the OP's shoes. I would find out the name of the lender that is initiating foreclosure proceedings (that can be done by simply asking the landlord, checking the local foreclosure ads in the newspaper or checking public deed records), contact the lender and explain the situation. The lender can then send out a rent interception notice to the OP, which will provide that the landlord is in default under the loan documents and, due to a standard clause contained in all the security deeds/mortgage/deeds of trust, the lender is exercising its right to require the tenant to tender all lease payments to the lender. This will protect the OP if the current landlord doesn't turn over rental payments to the lender but the lender, after the foreclosure, decides to recognize the existing lease and requires the tenant to make the rental payment again. The OP also bringing the security deposit issue to the attention of the lender early on can also allow the lender to do something about it, such as to freeze landlord's accounts with security deposits, etc...

taxmantoo said: It can take forever to evict tenants after a foreclosure in Illinois under 2008 law.

Link to related topic on FWF.

that no longer applies...it only lasted for a week and they are back to evicting people again.
I don't mind the opportunity to renegotiate my lease as I can easily speak on behalf of both renting apartments. I just wanted to protect the SD that was already paid.

geo123 said: bigmarley4 said: If you honor the lease it will be difficult for them to evict you.In the OP's context, this statement is inaccurate.

Yes, excellent points from Geo. I would still honor the lease in the meantime, but definately be proactive about investigating the lender, foreclosure proceedings, etc.

bigmarley4 said: Yes, excellent points from Geo. I would still honor the lease in the meantime, but definately be proactive about investigating the lender, foreclosure proceedings, etc.I wholeheartedly agree with this and it is a very important point to keep in mind. As a tenant, you should NEVER assume that a foreclosure is a done deal and stop making rental payments. There are dozens of reasons that foreclosures get postponed by at last minute ALL THE TIME -- sometimes lenders/lenders' counsel discover a defect in the foreclosure ad that requires the ad to be re-run, sometimes pre-foreclosure title updates reveal a federal tax lien that must be handled before the foreclosure (lenders must then give statutorily prescribed notice of the foreclosure to the IRS, such that the IRS can then exercise its right to redeem the property after the foreclosure; if the notice is not given, the federal tax lien is NOT extinguished at the foreclosure, which can be a disaster for the lender/new property owner), sometimes appraisals/environmental inspections do not come back in time, etc... Further, it is not at all unusual for forbearance agreements to be executed at the 11th hour, thereby temporarily postpoining foreclosures or for the landlords to file for bankruptcy protection, which can also delay foreclosures.

If you, as a tenant, assume that a foreclosure is a foregone conclusion and stop paying rent, it can mean pretty disastrous consequences for you, especially if the foreclosure does not take place for one of the numerous reasons I mentioned above. Again, as I mentioned above, your best bet under the circumstances is to contact the lender and to have the lender send out a rent interception letter, such that you will be making rental payments to the lender rather than to the landlord. Do not just unilaterally decide to stop paying rent without making pretty d&mn sure you know what you are doing.

The problem with telling the OP to demand his security deposit back within X days is that the landlord isn't required to do so. If the ownership changes, he is supposed to transfer all the security deposits to the new owner. He is only supposed to refund it to the tenants after they move out.

The OP's best bet is to talk to the landlord, and suggest applying the SD towards November rent. If the landlord refuses, explain the concern over the SD disappearing, and offer to meet with landlord and bank to discuss the issue. If the bank is willing to take responsibility for the SD when you move out, fine. Just make sure to get it in writing before you fork over the rent.

If the landlord refuses to apply the SD or provide assurances from the lender that the SD will be transferred, tell him if he is unwilling to modify the SD for rent clause, you are unwilling to change the payee on your rent check, and will submit it to the corporation.

In Mass, the security deposit is supposed to (only 2 of my 3 landlords have done it) be held in an escrow style bank account with the tenants name on it. Is this not the case in other states?

geo123 said: Xeon852 said: In Mass, the security deposit is supposed to (only 2 of my 3 landlords have done it) be held in an escrow style bank account with the tenants name on it. Is this not the case in other states?First, this obviously varies state to state but small landlords are often exempt from the requirement of keeping security deposits in a separate escrow account. Second, even if they are subject to such a requirement but choose to ignore it (as often happens in meltdown situations), you will typically only have an unsecured junior claim against the landlord. This means that if the landlord is insolvent and decides to just take your security deposit, it will be next to impossible for you to get it back.

If your state doesn't have that as a law, your county or city might... Unfortunately most smaller landlords know nothing about the laws.

geo123 said: Xeon852 said: In Mass, the security deposit is supposed to (only 2 of my 3 landlords have done it) be held in an escrow style bank account with the tenants name on it. Is this not the case in other states?First, this obviously varies state to state but small landlords are often exempt from the requirement of keeping security deposits in a separate escrow account. Second, even if they are subject to such a requirement but choose to ignore it (as often happens in meltdown situations), you will typically only have an unsecured junior claim against the landlord. This means that if the landlord is insolvent and decides to just take your security deposit, it will be next to impossible for you to get it back.

In massachusetts all landlords are required to do this. My mom hit the landlord badly for failing to do this. Managed to get 5% interest on it because of massachusetts law says you pay actual interest on the escrow account or it defaults to 5%. Since he didn't have an escrow we got the 5%. Mind you we could have easily lost the money given the house was sold as a short sale. Would much rather the money be in escrow than getting the 5%.

But this all varies by state. OP really needs to find a state specific website that lists all info about foreclosure, evictions , and the security deposit and possibly talk to a lawyer to verify the info found online.

As others have said you need to pay the rent to the same address, name etc. until you get in writing that you should be changing this and even then i would be suspicious. It sounds like the landlord is trying to pull a fast one.

Dude, I would not pay him that is for sure.
You might want to just wait for further instructions. If new owner comes around asking, say you were confused as to whom to pay since old landlord was asking for check made out to him.

Tell your landlord that your Nigerian uncle was recently awarded a $56 million estate from the liquidated assets of their king. Your uncle has offered to pay your remaining rent in full, up front for the remaining lease! To speed things up, your uncle will just transfer $50K to the landlord, and the landlord will in return, refund the difference.