Legal Question in Landlord & Tenant Law in California

I would have to see a copy of the actual rental agreement signed. In general, all deposits must be refundable, but the partial payment of the first month's rent can be made non-refundable if the contract so states. If you do not state that it is non-refundable, you probably must return it, although you might have the right to sue the tenant for the losses you suffered because of the amount of time you kept the property off the rental market because they had signed to rent it. Once all the terms of the agreement have been fulfilled, the contract is binding. If they are alleging it was not effective yet because they had not moved in, that is incorrect. One does not have to take delivery of the good purchased to have a binding contract, but that does go to the issue of what the damages are to the seller.

If you want, I can review the Agreement and any writings exchanges between the parties to give you a definitive answer; I would charge $150 per hour to do that.

The lease is binding when signed. There is no cooling off period on a lease. You don't get to change your mind after you sign it. I have no idea why Shers says he needs to see the lease. Unless the lease specifically says they can change their mind, they can't. They owe you rent for as long as it takes for you to find a new tenant (although you are required to take all commercially reasonable steps to find a new tenant in order to charge them that rent) plus your advertising expenses, etc., and you are free to apply the $700 to the money they owe you, as well as take them to small claims court for the balance if it is over $700.

I suggested the lease needs to be examined as it might state that the $700 is refundable or is not. It might also describe the $700 has being a sum that is forfeited upon the tenant's breach of the contract. What the lease agreement states may determine your best argument to the tenant; if you write him and raise an invalid argument, he will be more likely to ignore everything you say. The tenant may also order a stop payment on the check. It normally is best to read the document in question before going out on a limb and assuming what it says, especially when landlords are so disfavored by the court and legislative systems. Since you have gotten different opinions from different people the last thing you need is advise from some lawyer who may not aware be aware of all of the facts. You probably are entitle to keep the $700, but I can not say that with 100% certainty, although Mr. McCormick, who is very knowledgeable, apparently feels he can