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Can landlord offer the $3,000 HAFA relocation assistance in lieu of security deposit refund?

Phoenix, AZ |

As landlord, I have been pre-qualified for a short sale under HAFA. As the landlord, I can also request $3,000 relocation assistance for the tenant under the program. Tenant is on month to month and willing to move at (or around) closing time. Can I have a written agreement with the tenant that if the $3,000 is approved and paid out, that this will be in lieu of any refund of security deposit?

Loan is current, but tenant deposits have been exhausted maintaining the property. If deposits have to be refunded, the mortgage payments will have to go in to default to recoup the deposit amounts. If in default, most likely will no longer qualify for this program. The refundable deposit is about 1/2 the $3,000.

Attorney Answers 2

Posted

Your thoughts are not leading down a safe path. Security deposits are very closely protected under Arizona law. If they are not returned, and the tenant is due a refund, you simply lose. I am not sure why you are concerned about this issue. The deposit does not need to be returned until after the tenant has vacated and time has passed. Why not (1) sell the house; (2) collect your $3,000 at close of escrow; and (3) pay the $1,500 to the tenant later that afternoon?

While you and your tenant can make agreements, you should be very careful since the security deposit issue is controlled by statute.

Douglas Edmunds is in the business of helping people and companies file for bankruptcy protection. The bankruptcy code requires that I call my firm a "debt relief agency." Any answers or information provided is for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the legal issues. This is not intended to create a attorney-client relationship. Each individual's situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state for specific information.

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Posted

The $3,000 is paid to the tenant, not the seller. The tenant is on the HUD1 for the $3,000.

Douglas Garth Edmunds

Douglas Garth Edmunds

Posted

I simply cannot assure you that the tenant will not cause trouble here. You can reach an agreement to this effect; however, the safe and conservative path is to treat the HAFA relocation assistance as entirely separate from the security deposit issue. Beyond this, I believe you would require the assistance of an attorney to review any documents you have here and provide more specific advice.

Posted

I agree with Mr. Edmunds, your thinking sounds very dangerous. Security deposits are not supposed to be used to maintain the property, that is your separate obligation as the landlord and owner of the home. But you do not need to return the security deposit until after the tenant has moved out, so it gives you some time to come up with the money. You may be able to make a deal with the tenant, but I would make sure you have an attorney draft/review the documentation to ensure it protects you. Do you have any leverage to entice the tenant into making this deal? Seems like you are going to need something to convince the tenant to forgo the $1500 deposit.

Ms. Peddy Berg is licensed to practice law in Arizona and California (currently inactive); and her office is located in Scottsdale, Arizona. You can contact Ms. Peddy Berg by calling her office at (480) 382-3109; or contacting her through her website www.thepeddyberglawfirm.com. In accordance with AVVO terms and conditions, this answer does not constitute legal advice, and should not be relied upon. Answering this question does not create an attorney-client relationship with Ms. Peddy Berg or The Peddy Berg Law Firm, PLLC. Each state has different laws, every situation is specific to its given facts, and it is impossible to evaluate and provide advice on a legal issue without first doing a full analysis of the facts and documentation via an individual consultation.

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Posted

No leverage needed. Told tenant that I could request $3,000 for relocation assistance. Tenant is happy to take it instead of refund of deposit as long as they get any deposit refund if $3,000 is not approved. I am on very good terms with all my tenants despite having to short sale. This tenant (actually all my tenants) has been very co-operative with showings, BPOs and inspections. Tenant has been wanting to move closer to work anyways and the $3,000 will make it easier.

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