How to Handle a Security Deposit for Multiple Tenants on One Lease when one or more tenants are moving out and new tenants are moving in.

What happens when just one tenant is moving out, and they are asking for their security deposit back, but there are tenants staying and the lease is not over?

I’m Sandi Warner. If you haven’t yet subscribed to our channel, please hit the subscribe button. Give us a thumbs up if you think this is good content, and ring that bell so you get notified when we put out new and interesting information for you. If you own a property or you’re thinking about owning a property, and if you’re interested in house hacking a home that you already own, let’s talk about what happens when you have roommate scenarios.

When you have roommates, you probably wrote a single lease with some joint and severability language. In most cases there are not mulitiple leases signed with multiple tenants, unless you’re renting rooms. Those tenants, all three of them together, or four or two, are one person in your eyes.

So we just had one of our agents ask this question. There is a property with three tenants, one lease. Two tenants want to renew for the next three months; one tenant’s going to leave, and a new unknown tenant is taking their place.

How is the security deposit managed in that scenario?

Here’s what we do. If you didn’t know, Warner Realty Group also manages property in Newport County. We have somewhere in the range of 200 properties, and we deal specifically with rental properties. So we do this a lot.

The security deposit stays with the lease. Since the lease is being extended the security deposit is not yet returned.

The best practice is to have the incoming tenant pay their portion of the security deposit to the outgoing tenant, once the incoming tenant is comfortable there’s no damages or other issues that will affect the incoming tenant.

In other words, that transaction between the incoming and outgoing tenant is between them and doesn’t involve the landlord.

That being said, the incoming tenant is subject to an application, credit report and background check before approval for this switch is made. Subletting is not permitting so the tenant swap can’t happen unless the landlord approves the change.

The incoming tenant should be notified of their rights and obligations under the existing lease. They should receive copies of any condition reports made at lease inception so they can make the decision to assume the liabilty with full knowledge of what that means.

Do not return the security deposit unless you move everyone out, have time to fix and clean the apartment, move everyone back in and start fresh. If they’re taking over the existing lease, they’re taking the lease under it’s existing terms.

I hope that’s useful information. I’m Sandi Warner with Warner Realty Group, Real Estate Sales and Rentals, and Property Management. If you’re tired of renting, check out these tips for what Buying Now vs Timing the Market

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For Tenants, here’s some great Tenant based information on Rhode Island Security Deposits:,deposit%20of%20up%20to%20%24400.