Dear fellow BPers,

I have a house that leased to 4 tenants in California. Unfortunately, their relation broke down and were disputing about anything. In fact, one tenant is already threatening to sue another in a small claim court.  Therefore, I have a question about how to distribute the deposit after deduction. So far, I have come up with two approaches:

1. Writing a single check with the total deposit amount after deduction and naming all tenants' names joined by "AND" on the pay-to field. However, someone in my bank said although a teller would normally ensure all payees endorse the check before handling the payout they do not know how other banks or online deposit app will handle it.

2. Creating a form that allow tenants to determine how to divide the deposit after deduction and require all of them to sign it. I will not distribute any funds to any individuals until the form is executed by all the roommates. If they cannot sign the form within 21 days, which is the California's statutory deadline for returning the deposit, I am planning to create a trust account to hold the deposit after deduction with the tenants named as beneficiaries. This hopefully would allow the court to see my dilemma to distribute the deposit to each individuals.

I would appreciate your feedback on the two approaches that I am thinking and please feel free to suggest alternative approaches.

Thanks, -Wei