Okay, lets try bringing this together....
"if a rental lease is not initialed on every page by the landlord and the tenants is it still a valid lease?"
*** Yes.
"lease was not initialed on all the pages i was told this makes the lease not legal"
*** Whoever told you this is wrong.
"ok they said be breif but here we go. rented house in oct 97 with realter a in may 99 realter b took over rented for 3 more years,"
*** Got you so far..... 3 year lease signed in May 99, would be valid until May 2002.
"new realter sent a new lease at end of sept. 2001, did not renew"
*** OKay, so far, you have rejected lease extension past obligation until May 2002.
"sent a letter to realter moving buying a house gave 30 days notice, they kept my deposit. moved end of november 2001"
*** Okay, here is your first problem. If the above is correct, your lease obligation ran until May 2002. You moved in Nov 2001. That is breach of the lease.
"got letter from homeowners lawyer they want money."
*** How much are they asking for? and for what months?? How much damages? What was the deposit??
"they sent copy of origional 97 lease but the lease was not initialed on all of the pages by the tenants. they rerented the house in march 2002."
*** On your breach in Nov 2001, the landlord has an obligation to 'mitigate' his damages. That means that he MUST make a reasonable effort to re-lease the property on your breach. The problem you are going to have is..... showing that they did NOT make that reasonable attempt.
"lease was not signed by the landlords"
*** That could and would be very easily remedied simply by having them sign it..... thereby making it binding.
Summary:
1) Deposit. How much? What damages did you leave to be deducted from the deposit?? Did you owe ANY rent, late fees, penalties when you left? Did the landlord send a statement of the deposit account within 21 days of your vacating premises?
2) Demand for unpaid rent. At this point, I would simply ask them to provide proof that they tried to mitigate the breach.