Q: what should I do if a former tenant returns a partial security deposit refund and demands it all back or be sued?
The tenants heldover 2 days beyond the lease termination date then called the police on day 3 when I said we had to wrap things up, claiming I was trying to lock them out and refuse to let them take their possessions. I never locked them out and never threatened to do so, but I did ask if they can move their remaining possessions to the lawn and can take as much time as they need to finish loading the truck. The police did have us make an agreement to let them leave their things there and pick the rest up the next morning. They agreed, only to refuse to get them that day and called the Sheriff instead, again claiming I refused to let them get their stuff. After 4 painful days and 2 interventions with the authorities (initiated by them) it was finally over. Once their security deposit statement & partial refund was sent, they sent it back demanding all of it or they'll sue for locking them out and withholding their property and thereby not allowing them to clean and make repairs.
A:
Unfortunately, I doubt returning their deposit will end it unless there is a settlement agreement signed by all parties.
If they are not willing to enter into a settlement agreement, get the police reports to determine what the police wrote in the reports. If the report is neutral or favorable to you, and you have witnesses and other evidence, you MAY want to think about fighting the allegations.
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