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  1. #1
    cheddar cat is offline Junior Member
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    Question Tenant security deposit, one tenant of 3 leaving, replaced by new tenant

    What is the name of your state? North Carolina.
    I am a landlord , renting a house that has three tenants. The lease is one year, with annual renewal, if tenants hold over beyond initial term (August1, 2007 to July 31, 2008)
    The tenants are all listed on the Lease and all pay their rent in equal portions (thirds) They paid the security/ cleaning deposit as a lump sum, with the understanding it would be returned as a lump sum to all three within 30 days upon termination at the time the of "move-out", less any sums retained for damage/ cleaning.
    The house was entirely vacant upon move-in and a very extensive move-in form was completed by myself and one of the tenants, that was representing the other two.
    I was notified last PM that one tenant will be leaving a the end of the initial term, two will be staying on and the tenant moving has found what will probably be a "replacement" tenant for herself. Now, here is where I am having the Problems/Questions.
    Since the property will not be vacated by ALL the tenants, how do I determine how to return, what portion of the security deposit to the leaving tenant? This is an environment that would keep changing. On trips to the house some damage has been noted. The intention was for it to be repaired after "ALL" tenants have left. A total amount returned to ALL would be given in a lump sum (as recieved), less damage repair costs.
    Also, the new tenant moving in would NOT be responsible the damage already noted.
    I had thought about a new move-in inspection that would only apply to the new tenant. The damage would be noted, etc. But as I said before the house was vacant when first inspected, and now filled with furniture, who knows what is lurking in hidden places?
    Also, the other problem is the first two tenants staying on would actually be in a "renewal" term, I have decided on that to probably just do a new Lease, with no changes (ie. rent increases) and remove the tenants name that is leaving, and replace it with the new tenants name.
    The biggest problem is how to solve this security deposit issue, I am totally perplexed on what to do. The lease does not allow assignment/ subletting by the tenants. Since the situation will keep changing, I feel the need to hold the full amount of the security until "ALL" tenants have left, as one cannot predict future damages. HELP!
  2. #2
    JETX is offline Senior Member
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    Simple... contact the tenants in writing and ask them to advise you IN WRITING as to how they want to handle the deposit return in this case (the new tenant could pay his/her deposit to the leaving tenant, thereby 'transferring' the leaving tenants right to the new, etc.).

    Once this case is resolved, you need to have a WRITTEN agreement with each of the tenants (since each is an 'independent' paying their own 1/3 of the total rent amount) that since the rents are paid individually, you will handle the deposit the same way... each tenant 'owns' 1/3 of the total deposit and each tenant will have to advise you in WRITING as to how to handle their 1/3 when they terminate the lease.

    You should NEVER have allowed a 'pooling' of the deposit with three individual tenants.
  3. #3
    COlandlord is offline Member
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    I totally disagree with Jetx. The deposit stays with the units until ALL tenants have vacated. I have tenants sign a release of the deposit (including all rights and responsibilities to the unit) when a tenant vacates. All occupants have to agree to it or it doesn't happen. The deposit, after deductions, is returned to the current lease holders when vacated.

    I never seperate the deposit between the residents. This causes difficulties in determining who caused damage, etc. That is not your responsibility. One deposit is issued at the end of the occupancy and the roommates can haggle over who gets what.
  4. #4
    HuAi is offline Member
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    You're wrong COlandlord. Tenant who is moving out is not breaking his lease. He is leaving at the end of lease term, and has informed you of that. He is under no obligation to find a replacement tenant. The lease will not automatically renew - you should send out notice to ALL your tenants that lease will not be renewed as is. The fact that you want to move in a new replacement tenant asap and not lose the other 2 tenants is between you and the 3 new tenants. You owe the old set of tenants their old security deposit back, and the new set of tenants owes you a new security deposit prior to move in.

    Do a background check on the new tenant, and write up a new lease for the 2 remaining tenants + replacement tenant.

    This sounds like a pain in terms of logistics - so I would suggest you ask the tenants to make it easier for you - all money exchanges hands same day - you bring them cash and they do the same. You skip the moveout inspection on condition that the new set of tenants accepts the 1 year old move in condition checklist in writing as the condition you are giving it to them now.
    Last edited by HuAi; 05-23-2008 at 11:25 AM.
  5. #5
    COlandlord is offline Member
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    OP..what does your lease state. Standard leases will state that all terms/conditions of the lease are joint and several. If any tenant remains after the inital term the lease renews itself on a month to month. A security deposit will roll over regardless of one member leaves and you are under NO OBLIGATION to return a partial security deposit (unless state law dictates otherwise).
  6. #6
    HuAi is offline Member
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    If the OP receives a notice to vacate (which he has) and the remaining tenants stay over their lease w/out making arrangements with him then they are holdover tenants subject to eviction and security deposit is not due back until he has regained possession.

    However that has not happened yet, and it looks like they're trying to arrange a painless and amicable transfer. Legally one lease is ending (with 3 people on that lease) and another one is beginning (with 3 other people on it). The fact that 2 same people are on both lease does not change the procedure that has to be followed.
  7. #7
    cheddar cat is offline Junior Member
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    To: COlandlord and HuAi- More info about this situation:
    It is correct that the tenant leaving is fufilling their obligation. But, the 2 remaining tenants have decided to hold over and the Lease clearly states it IS an automatic annual renewal if they do this. The aquistion of the "new" propspective tenant was totally initiated by the tenant that is leaving. I am dealing with some very responsible people here. This is why I am having trouble with how to return within 30 days of departure, the "portion" of deposit duethe leaving tenant, and not leave the other two remaining holding the bag if some of the damage has been caused by the vacating tenant. I thought about a Move- Out inspection of the "observable" areas which would match the Move-In inspection for the new tenant. Therefore, the new tenant would have no responsibility for existiing damage. COlandlords Idea about a release waiver from the 2 remaining tenants might work. I have leased this house for 15 years with only four previous tenants This is the first time I have had to deal with a "partial" ending of a lease and "continuance" of the lease at the same time. Any ideas would help. cheddar cat
  8. #8
    JETX is offline Senior Member
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    Quote Originally Posted by COlandlord View Post
    I totally disagree with Jetx. The deposit stays with the units until ALL tenants have vacated.
    I guess you missed the part where the OP said that he receives individual rent from each of the tenants, huh??

    I have tenants sign a release of the deposit (including all rights and responsibilities to the unit) when a tenant vacates. All occupants have to agree to it or it doesn't happen. The deposit, after deductions, is returned to the current lease holders when vacated.

    I never seperate the deposit between the residents. This causes difficulties in determining who caused damage, etc. That is not your responsibility. One deposit is issued at the end of the occupancy and the roommates can haggle over who gets what.
    And of course, no one gives a crap what YOU do.
  9. #9
    cheddar cat is offline Junior Member
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    Jetx,the logic of COlandlord makes sense

    The tenants are not a family, it is three single school teachers, sharing a house. They devide the rent in equal portions,as they have decided among themselves and are all listed on the lease as the tenants, but even though they have their own bedrooms, the rest of the house is a "common" area and therefore the security deposit is a treated as a whole as I could not possibly determine who is doing what. I would treat damage to each individuals bedroom as their sole responsibility, but the rest of the property is a "shared" area and cannot be logically separated. By the way, I posted my question because I want to be fair to all involved and "I" do give a crap about doing what is best for all concerned.
  10. #10
    FarmerJ is offline Senior Member
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    Id suggest get in there make the repairs both tenant damage and normal wear and tear repairs and then the 2 who remain can be sent billing notices via certified mail for the damage. Collect from the new person what would be 1/3 of the deposit , take pics of the room the new one is moving into and send out disposition notice to the 3rd tenant. The two who remain if they wont pay it take them to court. In a new lease do permit them all to be responsible but this way going in and repairing damage and not delaying those repairs in the future will mean less work to sort it all out later. if one of the original 3 did more common area damage than the other 2 then they can fight it out in court amongst them selfs.
    Last edited by FarmerJ; 05-25-2008 at 06:51 PM.
  11. #11
    ncpropmgr is offline Member
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    Here is what you need to do in the state of NC. The security deposit goes WITH the dwelling that is rented. Don't sweat over it, put it in the tenants hands.

    What I do is I make the person moving out sign an "assigment of security deposit form" which releases any obligation of that person to receive any of the deposit back...the new person has to pay the person moving out the deposit.

    remove yourself from this situation!

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