3 roommates, 1 moving out, re-newing lease - dealing with deposit
Boston, MA · Member since 2014 · 5 posts · 1 vote
3 roommates, 1 moving out, re-newing lease - dealing with deposit
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Developer · New Orleans, LA · Member since 2015 · 1k+ posts · 898 votes
10y@Peter Hroph I dont know why you are considering even given them the deposit back for a lease renewal. I have rented to college students that swap tenants, and I informed them that the deposit is to be worked out between themselves, and I am NOT returning any deposit for a renewal. If one moved out and they did not have another roommate, would you accept 2/3 of the deposit? No, you would not. You ask for one rent check, its not up to you to decide who pays what, just that the rent is paid in full.
How I would personally handle it is to tell them no deposit will be return until the unit is vacated by everyone. If they dont like that, you can redo the entire lease, return the entire deposit, increase the rent and the security deposit, and have them sign an entire new lease.
I tell me tenants that are roommates that I collect the full rent, how they get it is up to them. I dont take partial rent payments, so if one roommate cant pay rent, everyone gets evicted. Might sound harsh, but I dont need roommate drama as a landlord.
11 Replies
- Investor · Juneau, AK · Member since 2015 · 980 posts · 741 votes10y
I think there are a couple of plausible routes.
What I have done in the past is simply do a walk through to make sure the deposit return is warranted (no damage) and this is also a nice chance to peak in for any squeaks and leaks. I just ask that all the departing tenant's belonging be removed and any keys turned in ( I would give the option of a lock change if they felt it needed).
If the unit looks good, then I would return the deposit (separate check if they'd like) and do a new lease with just the two remaining folks with first month's rent and deposit. Pretty clean and documented transaction there. A standard lease signing.
One could credit the remaining folks for the deposit on file and return just the leaving tenant pro rata, but then you need a small check from the remaining tenants anyway to get the full deposit, and you never know how they have allocated or paid the deposit (or even if they are on good terms), and you rely on the kindness of strangers to return it to the leaving guy (so he does not ask you for it later).
Either way, make sure it is crystal clear and communicated (I communicate it multiple times) to ensure a smooth transition and prevent problems; that may be key, get the fuzziness out and make sure no feathers are ruffled. Should be smooth sailing, especially since you have done some trouble shooting already.
Best of luck
- Developer · New Orleans, LA · Member since 2015 · 1k+ posts · 898 votes10y
@Peter Hroph I dont know why you are considering even given them the deposit back for a lease renewal. I have rented to college students that swap tenants, and I informed them that the deposit is to be worked out between themselves, and I am NOT returning any deposit for a renewal. If one moved out and they did not have another roommate, would you accept 2/3 of the deposit? No, you would not. You ask for one rent check, its not up to you to decide who pays what, just that the rent is paid in full.
How I would personally handle it is to tell them no deposit will be return until the unit is vacated by everyone. If they dont like that, you can redo the entire lease, return the entire deposit, increase the rent and the security deposit, and have them sign an entire new lease.
I tell me tenants that are roommates that I collect the full rent, how they get it is up to them. I dont take partial rent payments, so if one roommate cant pay rent, everyone gets evicted. Might sound harsh, but I dont need roommate drama as a landlord.
- McKinney, TX · Member since 2016 · 33 posts · 4 votes10yTypically the deposit is refundable at the time of move out and not renewal. I would complete an addendum to the lease to remove the previous tenant and add the new tenant. The deposit stays with the remaining tenants to cover any possible damage when they vacate. The tenants would need to work out any deposit reimbursements amongst themselves in my opinion.
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes10y
Originally posted by @Peter Hroph:
Appreciate in advance for advice.
I plan to re-new lease but unsure how to deal with deposit and last month's rent. I have 3 great tenants who are roommates - who also paid last month's and deposit in '15. One of them is moving out, and 2 remaining will be staying. I only get one check from them on monthly basis, they divide amount between each other, equally.
Oct 1 is the date when lease expires. Instead of 'returning' deposit from '15, and having two remaining write new check, can anyone suggest wording/letter that I could have the moving out tenant sign stating something along the lines of 'I, ____, have received my full deposit back, including interest, from my roommates Xname and Zname and do not expect any additional monetary return from my landlord, _____' ?
Should I deal with it differently? They are nice young working professionals, and I have no doubt they will, if not already, return their deposit share back to the leaving tenant. However, I would like to protect myself.I concur with Max, you're contractually required to make the check out to whoever is listed on the lease agreement. Do that, and let them figure out how to divvy it up for themselves. It's not your problem.
- 10yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
Seconding @Mike Wood's comments. Have them work it out among themselves. You need $X for a security deposit. They paid you $X. They are still occupying the property, so you keep $X deposit. The remaining roommates would have to come up with the missing third anyway, have them give directly to the vacating roomie.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes10y
I don't know an easy solution to this. I do have a suggestion you might consider in the future: have your tenants sign the lease which identifies ONE person to whom the deposit is refundable. I have couples living in my rentals. If they divorce, etc, I don't want to be caught in the middle. Of course, if the person the deposit is payable to is the one moving out, the other person would have to step up with a deposit. The joys of landlording....
- Real Estate Investor · Chicago, IL · Member since 2014 · 21 posts · 14 votes9y
I had this issue come up with a group of roommates. There were 3 roommates, and of course 2 of them would leave every year. They asked for a walk through for the roommates who were leaving. We did it that time, but will never do that again. We had people disagree about whose fault things were, and ended up causing a lot of issues between us and the roommates. While I was at the walkthrough, I also had a tenant argue with me over the policies which she was fully aware of, and it escalated to her yelling at me and having a fit. I don’t like being yelled at. Also, it’s another hour of my day that I lose, with no real advantage to me.
We have since revised our lease to say that there will be no walk throughs until the unit is completely vacant, and we do not walk through when anyone is present. We also have one person who is a main point of contact for the deposit and rent payments. Everyone is jointly and severally liable (make sure you include that clause), however we only have to deal with one person, not three.
This is good for a lot of reasons… first, I believe that it’s impossible to determine the condition of the unit when it is still full of stuff. Additionally, we don’t want to be involved in disputes about who did what. Last, if issues arise, it may sour the situation between ourselves and the remaining tenants for the duration of their stay. It is much simpler to deal with one person, and only at the very end. Set it up in the lease and tell them in advance, they will learn to sort it out themselves.
- Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes9y
Standard rule is deposit stays on unit until it is vacant. If you give deposit back now you are stating the new deposit covers current condition of apartment, you'd have to do a moveout, charge for damages if any, if you gave deposit back now.
You are not required to return deposit until then, If it's between roommates then let them handle it who pays who.
New lease with remaining tenants.
I would require to have all 3 roommates give you a roommate termination for exiting roommate(s) with everybody's signature. Roommate termination agreement.
It's your choice but usually deposit stays on apartment.
- Member since 2016 · 13k+ posts · 12k+ votes9y
Deposit and LMR are held by landlord, tenants work out any payment between them when one leaves. They do the same when a new tenant is accepted by the landlord. None of it is the landlords responsibility as full amount stays with landlord till the last tenant goes.
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