November 09, 2012

If I terminate my lease early, can my landlord keep my security deposit and charge me a fee?

Dear Consumer Ed:

I moved out of my apartment before my lease was up. The property management company made no effort to contact me to let me know I owed a lease cancellation fee. They claimed to have mailed two letters, but never did call me, nor did the letters arrive, nor was anything certified. They turned me over to a collections agency. Can they legally do that? They haven't explained where they got the dollar figure from, nor did they credit my security deposit when sending me to collections. Can they just keep my security deposit and not even count it as credit as to what I owe? That seems like double-dipping to me.

Consumer Ed says: 

When you signed your lease, you entered into a contract with your property management company.  In this situation, the terms of your lease are legally binding.  

Some leases allow tenants to cancel the lease early but impose a set penalty fee for doing so. If the terms of your lease permit your landlord to do this, you will likely be obligated to pay that fee, regardless of whether your unit sat vacant or was re-rented.  The property management company is not required to notify you before charging you the lease cancellation fee, unless your lease says that it must do so.  And yes, the property management company has the right to refer the matter to a debt collection agency after attempting to notify you of the debt.

Under the Fair Debt Collection Practices Act, it is the duty of the collection agency, not your property management company, to validate your debt.  Within five days of the collection agency’s initial communication with you, it must send you written notification including the following information:

  • The amount of the debt; 
  • The name of the creditor to whom the debt is owed; 
  • A statement that unless you dispute the validity of the debt within 30 days after receipt of the notice, the debt will be assumed to be valid; and
  • A statement that if you notify the debt collector in writing within the thirty-day period that the debt is disputed, the debt collector will obtain verification of the debt and mail it to you.

In most cases, the property management company is required to return your full security deposit within one month after you terminate your lease.  However, there are several conditions that would allow a landlord to keep a security deposit, including financial loss caused by your early termination of the lease.  Again, the particular terms of your lease will determine whether the property management company would be required to count the security deposit as credit toward the early termination fee that you owe.  You should carefully read your lease, and if it turns out that the terms don’t allow your landlord to impose a cancellation fee in addition to a forfeit of your security deposit, you may want to consult an attorney for legal advice.

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