Second Tenant Taking Over Lease - Security Deposit Question

[Tim Porsche]

Hi All,

I purchased a duplex back in October of last year and the upstairs unit was already rented when I bought it, so I let the tenant stay and they have been very good so far. I received the tenant's $500 security deposit from the seller at closing. About a month ago someone else moved into the unit with the tenant and I had them fill out an application and then approved them and had them both sign a new lease together. Now I've been informed that the original tenant is going to be moving in September and the second tenant wants to take over the lease. I am fine with this, but my question is, how should I handle the $500 security deposit? 

Normally when a tenant moves out, you do a walk through, see what needs repaired, get everything fixed up, and the costs to fix whatever was damage caused by the tenant vs regular wear and tear you would deduct from the security deposit. Should I still do this even though it is still actively being rented by the second tenant? Also, I assume I should have the second tenant sign a new lease after the current tenant moves out and require a security deposit correct? Any advice is appreciated, thanks in advance!