The tenant customer has a rent due date of the first day of the month. However, the Landlord Tenant Act of the State of Alabama has rules about when the Landlord has earned the right to keep the rent.
We are liable for the rent as a realty company working for client property owners until it has been “earned” according to state law.
Tenant pays rent for 123 Heavenly Way for the month of August in the amount of $1000.00 on August 1st. A tornado destroys the property 16 of August, which would be the first day of the second half of the month. State law requires the realty company to immediately return the “unearned” portion of the rent, which would be $500.00, since the property is not habitable for the second half of August. Also, the tenant deposits must be immediately returned as well when the property is not habitable due to destruction.
Because of the legal issues, we have to hold the rents in escrow until they have been earned, and disburse right at the end of the applicable month.
We have had to refund “unearned” rents to homes destroyed by tornado and fire as a realty company. So far none of our tenant customers have been hurt in these events and we are very thankful for that.