Tampa Property Management Tip #9 - Collect a Non-Refundable Deposit Before Taking a Rental Off the Market
If you have been a Tampa property management company long enough, you have seen approved tenants change their minds about leasing a rental for all sorts of crazy reasons. Just yesterday, I had a client give me $200 deposit to rent a house in Tampa. She calls me this morning wanting to cancel because she is afraid her furniture will not fit in the home. The house is a very small 3 Bed/2 Bath home in a decent neighborhood. The tenant inspected the home on 3 different occasions, but she suddenly develops buyer’s remorse the day after putting down a security deposit. I had already turned down two other people who wanted to rent the home in the last 24 hours.
Prospective tenants will have all sorts of reasons why they changed their minds. In my opinion, 50% of them just found a place they like better. The other half are simply wishy washy. Collecting a non-refundable security deposit helps dissuade people from changing their minds. I find that I only have 1 out of 20 people, who want to change their mind, actually forfeit their security deposit and rent something else. Prospects need to have “skin in the game” to ensure they follow through.
In order to make the non-refundable deposit truly non-refundable, you must have the tenant sign a piece of paper stating that, if they do not move in by a certain date, the deposit is forfeited. If you do not have the tenant sign this type of agreement, the tenant can take you small claims court and win. In the State of Florida, the tenant can collect not only the deposit, but court costs and up to triple the amount awarded by the court. I have in fact been sued by a tenant for this very reason. The judge would have loved to thrown the book at me, but I got the case dismissed on procedure issue (the person suing was not the person who put down the deposit). From that point on, I have prospects sign an agreement. We also notify them of this policy on the rental application which they also sign.
Therefore, you need to develop a standard form that specifically spells out the deposit is non-refundable and why. Make copies and keep them in your car, work, and home. You never know when you will be called out to collect a security deposit. I also have a receipt book and write an explanation on the receipt. This appeared to be acceptable to the judge as well. However, it is preferable to have the tenant sign a standard form so there can be no miscommunication of the intent.
When a prospect attempts to cancel on their promise to rent a property, you simply remind them they will lose their security deposit. Here is where you will hear all sorts of explanations, threats, and insults trying to convince you to refund the deposit. Just be polite and listen to their arguments and then remind them of the agreement they signed. I tell them, “I pulled the rental property off the market and turned away several good prospects because I had a deposit from you.” Most people understand this, but they still try to guilt me into refunding the deposit.
You must be mentally prepared to hear all these guilt trips. They will claim the deposit is needed to pay their electric bills or their kids will be in the dark. The money is needed to buy groceries. These people will give every reason and story under the sun to convince you to refund the deposit. Just stay polite but firm and feel free to end the conversation if the tone turns abusive. You should not become angry and get in a shouting match. Once the client calms down, they will often still rent your property, if you didn’t lose your cool.
This tip will save you thousands of dollars in lost rent if you implement it properly. It will also usually convince the prospect to not change their mind. Therefore, your Tampa property management company will make a great deal of money from a tenant that you would have lost.