Security Deposit Recovery When Your Rental Property Is Sold to a New Owner

Who Holds Your Deposit When the Building Sells?

When a rental home or multi-family apartment complex is sold during your tenancy, tenants frequently face confusion upon move-out when the new landlord claims they never received the security deposit funds from the previous owner.

Successor Landlord Liability

Under uniform landlord-tenant codes across major states (e.g., Cal. Civ. Code § 1950.5(h), N.Y. Gen. Oblig. Law § 7-105, and Tex. Prop. Code § 92.105), the new property owner legally steps into the shoes of the prior landlord. The new owner is strictly liable for the return of the tenant's security deposit regardless of whether the prior owner actually remitted the escrow funds at closing.

Joint and Several Liability

In many jurisdictions, both the former landlord who collected the deposit and the successor owner who purchased the property remain jointly and severally liable to the tenant until formal statutory written notice of transfer is served upon the tenant. In small claims court, simply name both entities as co-defendants.