We originally had 3 people sign a year lease. We've only taken payment from tenant A the entire year, including the original security deposit.
Tenant A is now leaving but Tenants B and C want to renew with a Tenant D (a person they found).
Do I give Tenant A the entire security deposit back and then charge Tenants B, C, and D another security deposit? If so, should I do a full inspection and subtract damages from the deposit amount? Also, is it reasonable to ask for the 2nd security deposit before I refund the first one?
Or, should I simply state the deposit remains since only one of the original 3 tenants is leaving and say that they have to figure it out from there (e.g. Tenant D pays his share to Tenant A). Would I be legally vulnerable since it was Tenant A who actually made all of the payments on behalf of Tenants B and C?
Tenant D pays tenant A their portion of the deposit.
As far as inspections are concerned you should be doing them regularly. When tenant caused damage is found you repair and bill tenants the cost of the repair. The deposit is never used to cover repair costs while tenants are in place. When all tenants are preparing to leave you do a final inspection and tenant caused damage is deducted from the security deposit at that time. Remainder of deposit, assuming there is any, is returned to departing tenants.
Make sure you thoroughly screen tenant D and add them to the lease. This is easiest if you use M2M leases. M2M s preferable to a term lease as it allows landlord maximum control over the property.
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