Who returns a tenant’s security deposit – the old landlord or the new one?

UPDATED: Nov 8, 2011

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Who returns a tenant’s security deposit – the old landlord or the new one?

I purchased a currently occupied rental property. The former landlord assigned me the lease which said “The lease is being assigned in connection with a short sale and is assigned on an as is basis without any representation or warranty and without assignment or transfer of any funds held by assignor, whether security or otherwise”. I claim he must return the security deposit to the tenants as it is their property, he claims it is now my responsibility. Who is right?

Asked on November 8, 2011 under Real Estate Law, Michigan


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

If you purchased a rental where there are existing tenants you should have received before close of escrow a tenant's estoppel certificate showing the rents, the security deposit, and signed by the tenants and the former landlord.

The escrow instructions should have required the security deposits to be placed into escrow for your retention. If the purchase agreement is silent as to who retains the security deposits of the tenants then the former owner needs to return them to you in trust since they are the moneys of the tenants.

I suggest that you consult with a real estate attorney about this situation with the former owner. Good luck.

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