Security deposit return rules in a divorce?

7 Replies

Hello, we have a couple that rented our townhouse in MN.  With 5 months to go in the lease, she left.  He has been paying the rent and wants to lease again in his name.  Does anyone know the rules on where the original "joint" security deposit would go to?  50/50? per divorce settlement/paperwork? he is entitled to it and can use for new lease?  

I would love feedback on experiences with this.  Thank you

Typically, what I've read is that you write a check to all tenants for the full amount, and let them sort it out.  So, you'd write a check for $XXX made out to "John Doe and Jane Doe."  You will want to address any damages prior to sending back a check made out to both of them (repair holes in walls, etc.) and deduct that cost from the check.  Though I guess they could both give you something in writing that they're ok with handling it differently (allowing him to take on the responsibility of all damages, or allowing him to have the entire deposit back, etc.).

If you're ok with keeping just the husband in there as a tenant (assuming he has sufficient income, credit, etc.), then you'll collect a new deposit from just him and write up a new rental agreement with just him.

Not a lawyer, not legal advice.  Check with a lawyer familiar with your state/local laws.

When we move new tenants in, we explain that deposits are not refunded until all tenants move out, that they need to work things out if one leaves earlier.  In my mind if one tenant moves out, they need to give written notice that they want off  the lease.  If they don't, it is in your best interest to leave the agreement alone.  Of course, we don't do renewals; it's all month to month and rolls forward.  But whenever we have to do updated paperwork when not everyone moves out, we rely on the original property condition report and security deposit.  Would you want to do a new property condition report when their furniture is possibly hiding damage?

@Michele Fischer great advice. I was actually sitting here thinking how to handle it. And you covered all areas.

Check the facts but I believe that if one of the tenants abandons the lease without proper notice they are not entitled to any of the security deposit. That sounds like something that should be figured out between the two on the lease only. I personally roll over the deposit if no move-out is happening. But this is a special situation.  

I spoke to a lawyer and he said there isn't a clear cut answer on this one.  He suggested writing letters to both parties stating the request to roll the amount over to a new lease and see if there is any push-back.  Thanks for everyone's ideas.

I would not get involved in my tenants' relationships.  Just go by the lease.  

It's between the tenants to figure out their security deposit.  Not your problem.

In other words, let her get the husband to give her half of the security deposit out of his own pocket.  That security deposit is for you to deal with any damages or lost rent from the tenant who moved in.  If that tenant is still in the unit, you keep the deposit.

To you, you have one tenant on your lease.  It doesn't matter how many people make up that "tenant."  One lease = one tenant.

So, if she comes to you wanting money, tell her she has to get it out of the husband, and her lawyer might want to include that in her divorce settlement, but it's not your problem.

That's what I'd do, anyway.

@MichelleFischer and @SueKelly for sound advice regarding deposits.  I'm in the same boat with multiple roommates moving out and replacing each other.  

In the future, I'll add a line to my leases or at least inform roommates that deposits are not refunded until all move out, in anticipation/avoidance of having to deal with this situation again.  I suppose for any situation with more than one adult tenant, it would be a good clause to include. You never know.  

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here