Does a tenant have a legal right to keep their key until they receive their security deposit? I have a tenant claiming that they have a legal right to that. This seems kind of strange to me and doesn't follow everything that has ever been required of me as a tenant or a landlord.
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He does have that legal right. You have the legal right to continue expecting rent, plus late fees.
Under no circumstance, change the locks. this means TROUBLE, for you.
I would send them a crr letter stating that as long as they keep the key, than there are still living in the unit. Deposit cannot be return till key in returned, place inspected to show if there are damages and 30 days notice given to end lease. Include that you need to set a time for an move out inspection.
Cover yourself here. They are playing games at your expense. If no forward address, send it to the rental unit. If it comes back, don't open.
Wait it out for them to return key and than continue with a date for inspection. Take plenty of pictures and let them see you take them. This way they know you mean business and be hard to argue damage.
Have them sign the move out sheet and get a forward address. If they don't provide, indicate that on the sheet and have them sign.
Remember to send dep less damages to them within time frame that state has. Send everything by crr letter.