One tenant moving out. What to do with last months rent?

Question

Hello Bigger Pockets,

I have a rental property in Watertown MA, and the lease is expiring soon. I sent out a lease renewal letter and I just heard back from the tenants this afternoon.

The rental has three tenants consisting of a couple (boyfriend/girlfriend) and a mutual friend. I was informed today that the friend would no longer be living at the rental and will be moving in with her boyfriend.

My question is this: How do I go about separating/refunding last months rent? I currently have an account dedicated to last months rent ($1,850). Do I refund the $1,850 to the three of them and have the remaining couple cut a new check? Do I have the couple cut me an additional check for the new outstanding balance ($616.67)? Is there another option I'm missing entirely?

I would think this is a fairly common occurrence, so I'm looking to the collective wisdom of BP to set me on the right track.

Thanks in advance,

- Matt Nolan

Kim Meredith Hampton · Answer

@Matt Nolan do a roommate lease form having the tenant leaving sign that he is in fact vacating and understands that the deposit remains with the unit. The other two sign the document as well. The deposit always remains with the property until all tenants have vacated. They must work out the money amongst themselves, not your problem

Matt Nolan · Answer

Thomas S.

Thanks for the reply. So it's typical to have the tenants hash it out on their own? I was unaware, but that would certainly make it easy on me.

I will not be going to a M2M lease, but a new year-long lease. There will be a $25 increase in the rent ($1,875 a month), so I suppose I will just have the current tenants cut me an additional check for $25 and have them cut a check to the friend that's moving out.

As a side, I'm constantly reading your post and love your matter-of-fact replies and your no nonsense approach to real estate investing. It's been extremely helpful with my own investing.

Thanks again!

Thomas S. · Answer

Your numbers are confusing meaning you are leaving something out of your explanation.

Assuming one or more of your present tenants intend to remain under lease you do nothing. The LMR deposit remains with you and the tenants work it out among themselves. If the amount of the LMR is being changed/reduced you return the difference to the tenants.

When you write the new M2M lease you include reference to the amount of the LMR that you will be holding.

Thomas S. · Answer

@Matt Nolan

I appreciate your comments but temper my advice with caution. It is very simple for me to say do this do that and I do not sugar coat that advice but you must be aware that implementation requires experience and skills that not every landlord has...For example when I advise evicting and the response is the cost is too high/give the tenant a chance that indicates a landlord without the experience to see long term.

Something to keep in mind is that every tenant situation/problem posted on this forum has it's roots in a landlords inability to manage their business properly. Tenants are not the problem the problem is always a landlords inability to manage tenants (funny that we all refer to them as bad tenants).

Matt Nolan · Answer

@Kim Meredith Hampton I hadn't heard of roommate lease form, but that certainly seems more formal/binding than telling them to simply deal with it. I appreciate the advice and will be printing a form out ASAP. Thanks!

@Christian Bors Good point regarding affordability for the remaining two, and it's something I've considered. The couple is more than capable of covering the cost of rent and have been fantastic tenants so far.

Thanks for the help!

One tenant moving out. What to do with last months rent?

One tenant moving out. What to do with last months rent?

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