Dealing With Deposits: Steps to Ensure You Get Your Money Back

Providing your landlord with a deposit is standard procedure; however, getting your deposit back may become a different matter entirely! Keep in mind this is your money, and it's not to be sacrificed lightly. It's money you want and/or will need at some point. With chiropractic tenants typically leasing the same practice location for an average of five years, it's easy to understand how paid deposits can be forgotten about. Remember this money and push to have it returned.

Why Your Deposit Matters (and Why You May Need to Get It Back)

Your deposit money can be used for other purposes – consider that "life happens" (on both a personal and professional basis) and it may become necessary to relocate. If that becomes the case, you will incur further expenses. Moving may seem out of the question, but revenues may be too low at your current location, or you may need to expand or downsize your commercial space, or even close your practice entirely (due to either personal or business reasons). Furthermore, your landlord may not even want to renew your commercial lease, for any of the following reasons:

• Another tenant wants to take over your current space and is willing to pay the landlord a higher rental rate.
• A neighboring tenant wants to expand their business and renovating into your space will be necessary to do so.
• You may have been delinquent with your previous rental payments or are in rent arrears.

It is important that you talk to your landlord about refunding your entire deposit as soon as you vacate the premises. You may be afraid to bring up the subject for fear your landlord may have some excuse for not giving you your deposit back (this reasoning may or may not be true). But you can't determine if there is a problem (and then work to solve the problem) if you don't ask before you move out.

Most landlords don't mark their calendar with a date to return your deposit. In fact, most landlords would be quite happy if you never brought up the subject again. Business owners of all types often contact us months after they've moved out and ask why their landlord hasn't refunded their deposit. In response, we usually start by asking, "Have you asked for the money back yet?" The answer is, typically, "No." We then begin with the basics: You have to ask to receive.

Questions to Ask Before You Need Your Deposit

We recommend you ask your property manager about the landlord's process for refunding deposits three or four months before your lease expires. When speaking with the property manager, ask these questions:

• Does the landlord require a letter or an invoice?
• On the last day of the lease, will there be an exit viewing and walk-through of the premises to ensure there is no damage?
• What should I do to get my full deposit back? Will I need to have the carpets cleaned and/or surrender all sets of keys?

Common Reasons for Not Returning Your Deposit

Landlords have many reasons why they can't or won't return your security deposit. You might hear any of the following explanations:

• You have damaged the premises in some fashion.
• You didn't remove your leasehold improvements.
• You removed leasehold improvements the landlord wanted you to leave.
• You owe Common Area Maintenance (CAM) charges from that year.
• You did not pay penalties or interest for late rent charges incurred.
• You subletted or assigned the lease agreement without landlord consent.
• You didn't remove your signage from the building and/or complete repairs.
• The landlord may have whittled away at your deposit over the years for small rental incidentals or items they have invoiced you, but you didn't pay.
• If your building has been sold since you first leased, the new landlord may claim he doesn't have your deposit, claiming the previous landlord never passed it along.
• If your landlord lost the building into receivership or had it taken over by the mortgage holder, your new landlord won't have the deposit because he bought the property from a bank and, in this case, your deposit was long gone.

If your landlord acknowledges he has your deposit, check your lease agreement. It may state the amount of time the landlord has to refund it. If not, ask for a refund within 10 days of your invoice to the landlord.

Steps to Getting Your Deposit Back

How can you get your deposit back in difficult circumstances? After you've invoiced the landlord in writing (keep a copy of your letter or your email sent), call the landlord's accounting department to ask how it plans to handle the return of your deposit. You will likely hear one of these two responses:

• Your deposit was applied to one of the previously listed points and you will receive a statement of account (meaning you will still owe money to the landlord).
• The landlord has a cash flow problem and can't return your deposit yet (yes, this does happen – the landlord is broke).
• After you know the reason for the delay, you have numerous options on how to get your deposit back from the landlord. These options include the following:
• Wait until any repairs are completed and for your landlord to determine the total cost of these repairs. You may receive a statement of account and any monies due at that time – if any money is left.
• Obtain a legally enforceable payment plan from the landlord (if the problem results from a landlord's low or no cash flow). Getting your money back over a period of time is better than getting no money back at all.
• Lawyer up. This process could be long, drawn-out and expensive if the matter goes to court.
• Depending on the jurisdiction, file a small-claims action against the landlord.

When you sell (or buy) a chiropractic practice, the landlord can either retain the tenant's deposit and apply it to the account for the new tenant or refund your deposit and then collect a new deposit from a new tenant when the lease is assigned. Most landlords have a policy about these transfer situations. You probably won't be in a position to dictate to your landlord which of the two ways just mentioned, but if you have a preference, there's no harm in asking when you make the lease assignment application.

The best way to handle the situation is to ask the landlord in advance which way he'd handle a deposit and then structure your purchase agreement accordingly. If you can't do that, make your purchase agreement flexible enough to cover whichever way the landlord wants to apply or refund the deposit.