1 of 3 tenants wants out of his lease and asked about his security deposit

3 Replies

Hi guys. I have a group of three young professionals living in a property. I have a ten page plain-language lease that states the lease will renew for another year if the proper notice has not been given. I received an email today with a two week notice of moving out (so 5/31). He was supposed to give 60 days notice.


He asked about security deposit. The other two guys are staying... but I don't know more than that. I have a the security deposit at a local bank. The bank statement for the security deposit comes to me (I provided the bank with the names of all three tenants when I set it up).

I want to be fair... but I think I want to avoid setting a precedent though too. Overall they have been good tenants in the first year.

Thoughts on how you would handle this situation?


Thanks!
Dave

Do the other two want to stay, and do they have enough income to pay without the third person?  If so, you can treat it as if all of them moved out, and settle the original security deposit; then have the remaining two sign a new lease and provide a new security deposit. 

Some will say to not let the third person off the hook, but he's not staying and it will make for an awkward situation if you don't take the high road here. 

If all the tenants are on one lease, then you have "one" tenant.  Your "one" tenant, happens to consist of 3 people.

It's not on you to figure out who paid how much of the deposit.  That's between them.  You need to keep your full deposit for this "tenant," until this "tenant" vacates.  If two of the three are staying on, then you still have your original "tenant," as far as the security deposit goes.

What the tenants need to do is negotiate a refund to the leaving tenant (and you don't get involved in this), and collect a new deposit from the new tenant (and you don't get involved in this, either).  

If they sign a new agreement, you put in it that their original security deposit will transfer to the new lease, and any refunds to previous roommates or collection of deposit money from new roommates is between them, but you will retain the original deposit, since the unit is being continually occupied, and any security deposit refund will be made out to the original tenants named on the original lease.

I'm confused about the 60 day notice.  Unless you have a separate lease with this one tenant, this tenant can't give separate notice to you.  When the original lease terminates, you can write a new one with new roommates, but in my opinion, then you should include a clause that I mentioned above regarding the security deposit.

If this "tenant" (meaning the original lease) is going to continue to stay in your unit, you have no way of knowing how much damage will be whose responsibility when they all finally move out.  This is why you can't get involved.  Because you can bet that if there's a lawsuit regarding what ends up happening when they move out, they will try to involve you.

It's up to the remaining tenants to pay the leaving tenant, if they want to.  Otherwise, the leaving tenant will just have to wait until all of the original tenants leave to get their portion of their deposit, or they can sue in small claims court to get it from their roommates.  

Otherwise, you'd have to kick them all out, assess the damage, deal with a refund, and then re-rent it and let the new tenants move back in with a new lease, and a new walk-through, etc.

Dave,

You may want to read this other thread, good advice: http://www.biggerpockets.com/forums/52/topics/1956...

We have rented to 3 college students.  When one moved out, no deposit was returned from us, it was up to them to work that out.  They submitted applications for a third roommate until they found one we'd accept.  Maybe the incoming paid a deposit to the two students that was then returned to the one moving out.  Regardless, not our problem.  But could depend on your rental agreement wording.

Does your tenant landlord law require that the deposit be held in their name?  You may be making it more complicated than you need to.  We have one segregated bank account for deposits, in our name, and we are just careful to account for ins and outs and that the balance ties to what belongs in there.

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