I recently was intending to rent a townhouse, and gave the landlord a security deposit on July 10th (and got a signed receipt.) I was told that it would be refunded in full if my rental app was denied. However, twelve days later I found out I would probably be losing my job. I told the landlord that I would not be able to rent after all, and requested my security deposit be returned. I had not yet turned in a rental app.
The landlord was upset, and told me that she had the right to hold my security deposit for 21 days, and that she would return it if someone else rented. I waited until after Sept 1, hoping that someone would and she would give it back, but no one did. Now she wants to keep the deposit.
Should I take this to small claims court? Can she countersue for lost rent?
I have not signed a lease (or anything else for that matter.) I backed out before things got that far. All we have are verbal agreements that I was interested in the property, and that she would give my security deposit back if my application was not approved. I also have a receipt she signed stating that the check I gave her was a security deposit for the property in question, and that I planned to move in on Aug. 15th. In the future, I will be sure not to hand over such a large deposit without signing something outlining the conditions of its return!
Your question is a good one and should probably be directed to a local attorney in your state. The answer is heavily dependent on local law, but I can give you a basic overview of security deposits for your reference.
The answer depends heavily on the lease you signed and whether it has an "acceleration" clause or something similar that would make all the rent due upon breach. Generally, a security deposit is not the property of the landlord; it is required to be kept seperate from the landlord's general funds.
Suing in small claims court (and defending against possible counterclaims -- get a lawyer to review the lease you signed for you) might be possible. I would recommend speaking to a local lawyer because security deposits are heavily dependent on local landlord-tenant ordinances or state law. Each state treats the relationship between landlord and security deposit the same, but the specifics (i.e. interest rate and remedies) are different.
NOTE: This answer is not intended to be legal advice and should not be construed in that way. This answer does not create an attorney-client relationship and no such relationship may be created absent a signed retainer agreement. The author is licensed in Illinois only, and his answer is for educational purposes alone.