Leases/Security Deposits

[owenkingdon]

I`m looking for a few ideas about handling a broken lease.  I have 2 tenants on a 1 yr lease were now 9 months in one wants to leave.  The other plans to get a roomate which is fine we`ll see if it actually happens.  However what happens with a security deposit in this senario.  Logically with a new roomate they would pay their half and that would go to the party moving out. But in the event a roomate has not been found what happens?  Thanks in advance.

 

[FayWong]

QUOTE (owenkingdon @ Apr 18 2008, 11:29 PM) I`m looking for a few ideas about handling a broken lease. I have 2 tenants on a 1 yr lease were now 9 months in one wants to leave. The other plans to get a roomate which is fine we`ll see if it actually happens. However what happens with a security deposit in this senario. Logically with a new roomate they would pay their half and that would go to the party moving out. But in the event a roomate has not been found what happens? Thanks in advance.
If a roomate is not found why would the person moving out get his deposit back? You return the deposit when the suite is empty and you have done the move out inspection. If one of the two is still there the deposit is not returned. Later, when the other one leaves the deposit is returned but who it is returned to depends on how you have it worded on your lease. If you can return it to just one of them then return it to the person who is staying. If based on the lease you have to return 1/2 to each, remind them of that so they can use the information to work out a fair deal between themselves, and the person leaving knows to give you a forwarding address.

 

[GarthChapman]

You also have the option to create a revision to the lease (or a new lease) and have the new tenants pay a security deposit and pay out the old deposit. I am not a lawyer, but it seems to me that in fact this route is probably wiser, as it is tough to enforce a legal agreement with a party who is no longer a party to the agreement, especially if you have agreed to their leaving!

 

[ChrisDavies]

Where is the suite located? The laws change from province to province. In Alberta, our policy has always been it`s up to the tenants to work it out and the deposit will be returned at the end of the lease. Usually the moving out tenant gets the deposit from the remaining tenant, and it can be helpful for you to provide an extra copy of the in-out report so they can figure it out.

 

[Thomas Beyer]

QUOTE (owenkingdon @ Apr 18 2008, 10:29 PM) I`m looking for a few ideas about handling a broken lease. I have 2 tenants on a 1 yr lease were now 9 months in one wants to leave. The other plans to get a roomate which is fine we`ll see if it actually happens. However what happens with a security deposit in this senario. Logically with a new roomate they would pay their half and that would go to the party moving out. But in the event a roomate has not been found what happens? Thanks in advance.

Not knowing the exact wording of the lease (or the province) .. or even 2 leases that you may have, you have 3 choices:


NICE GUY: pay them their 50% of deposit .. and find a new sub-tenant !

TOUGH GUY: inform them that they are in breach of lease, and not only will you not give them their security deposit back, you will also expect them to pay the remaining 3 months of rent ....

REASONABLE GUY: I would probably NOT give them the security deposit back until they have found a new sub-tenant and he/she has paid the 50% of the new security deposit .. I would also deduct any rents that they may miss .. say I`d deduct the one or 2 months that the sub-space is vacant until they find someone ... but work with them to find a new sub-tenant and be reasonable in approving a new person ..

 

[Eric Peters]

Not enough information - Where are you doing business.

From an Alberta perspective, Since when are you treating your two tenants in a single unit as separate entities? Any common lease would treat them as Jointly and Severally liable. There is no refund of any part of the Security Deposit until ALL the terms of the lease are satisfied.
It sound to me like the tenants are in the drivers seat here - as a Landlord - that`s your position. It is good to work with your tenants to achieve a reasonable way through this entanglement, but you can only do that effectively from a position of strength. A good lease provides all the strength you need.
I would favour Thomas` suggestion, but you also need to be proactive to minimize the risk of this happening again.

 

[owenkingdon]

Thanks for all the ideas and some of the reassurances too.  I should have been more clear they are indeed in on a joint lease which gives me a few more options.  I had been leaning toward the reasonable guy sort of approach.  The quandry for me was how to keep the security deposit while they are in the property.  I know they have to get the deposit back with a time frame but in the case of a lease, it`s at the end of the lease. It`s in Edmonton so I hang on to the security deposit till a sub lease is in there or it expires in August.  The rest of if they sort of figure out themselves.  Which is what I did in a different property but they were more organized and essential did what Thomas suggested among themselves.

 

[SamEfford]

Back when I was in college and renting, I had 4 roommates in a house that we were renting. There was a time when 1 roommate moved out (too much partying, too little studying) and the remaining 4 of us fully expected to assume his portion of the rent and security deposit until such a time that a new roommate could be found.

 

[RebeccaBryan]

It`s very important to learn landlording OR hire a PM who knows what they are doing! If you have the tendancy to be nice/it`s ok to push me around, rather than running your investments as a business then I suggest you hire a PM.