When the Landlord can Keep the Deposit and First Month’s Rent

A tenant for a property I manage entered into a lease with the landlord and paid a security deposit and first month’s rent. The day before the date the lease period began, the tenant notified me that he had changed his mind and no longer wanted to rent the property. The tenant asked me to send the security deposit and first month’s rent to his new address, but the landlord wants to keep the funds. Can the landlord do this?

Maybe. The landlord has an obligation to secure a satisfactory replacement tenant. A tenant may also attempt to locate a replacement tenant. If a satisfactory replacement tenant who can move in by the lease’s commencement date is not found, the landlord may hold the tenant in default and exercise the remedies in Paragraph 27 of the Residential Lease. This may allow the landlord to keep the security deposit and first month’s rent.

On the other hand, if the landlord does find a satisfactory replacement tenant who can move in by the commencement date, the landlord may only deduct from the security deposit and the first month’s rent either a sum agreed to in the lease as a cancellation fee or actual expenses incurred by the landlord in securing the replacement tenant.

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