Rentals and Security Deposits

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CurlyDave
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Rentals and Security Deposits

Post by CurlyDave » Sun Apr 15, 2018 1:55 am

We have a number of rentals and in the past few years there have been more and more roommate situations where a number of unrelated adults will jointly rent a unit and share the rent and other expenses. This actually works out very well for landlords, because the ability to pay rent is frequently higher than couples with children.

But, we have recently started to have situations arise where some of a group will move out and others will want to stay, possibly getting new roommates.

This creates an issue with security deposits since some, but not all of the original tenants, now want their security deposit back and the ones staying want to let theirs ride. But, short of having everyone move out and then cleaning and painting the whole thing there is no good way to account for the deposits.

What I would really like to do is adopt a "last man standing" clause in the rental agreements where everyone who moves in agrees that the deposit (after cleaning and damage repair) is owed to the last people from the original group who leave, and that anyone who leaves earlier is responsible to get his deposit from a new roommate moving in, or the remaining roommates. It would also have to cover the situation of when a couple divorces.

But is this legal? How do other landlords on this board handle the situation?

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Sandtrap
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Re: Rentals and Security Deposits

Post by Sandtrap » Sun Apr 15, 2018 2:00 am

I usually rent to a "primary" tenant. Sometimes, no matter what the relationship. That way, there's only one person on the lease. I don't handle multiple security deposits, etc. It's all on one person. If that person moves out, then I sign a new lease with the next most responsible "primary" and only, tenant on the lease. What this does is empower that one person as well as have the full weight of liability on them. Otherwise, it's sort of like getting into a rooming house situation which I don't want to get involved with.

The idea here is to keep things simple, empower only 1 person, etc. Because, when there's more than 1 person on the lease, things get complicated, human relationships and all the drama involved with that becomes a factor. . . best completely avoided.

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Nate79
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Re: Rentals and Security Deposits

Post by Nate79 » Sun Apr 15, 2018 9:36 am

The last time that I shared an apt with some friends in college we collectively put the money in a big pile for the deposit as well as rent. I do not understand why this would be any different. You are renting out one unit, whether to a group or to an individual. If someone wants their share of the deposit back its the groups problem, not yours. Now if you are doing individual agreements with each person in the group I would significantly increase the deposit amount to cover the risk.

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dm200
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Re: Rentals and Security Deposits

Post by dm200 » Sun Apr 15, 2018 9:49 am

Many decades ago, when single, I shared several single family homes with 1-3 others. I was the "primary" renter, on the lease, etc. I agreed to notify the landlord of all other residents, BUT I collected the share of the rent from the others, share of utilities and share of security deposit. This worked well for landlords since I was the only one they dealt with financially.

At the time, my income and credit status were such that I could, individually, qualify to rent the houses.

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Pajamas
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Re: Rentals and Security Deposits

Post by Pajamas » Sun Apr 15, 2018 9:53 am

CurlyDave wrote:
Sun Apr 15, 2018 1:55 am

But is this legal?
You should research both state and local laws. Sometimes the rules governing deposits are very detailed.

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dm200
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Re: Rentals and Security Deposits

Post by dm200 » Sun Apr 15, 2018 10:02 am

Even if there is one primary tenant, the landlord (in my opinion) should know basic information about all residents. [Emergencies, other crises, etc.]

I urge landlords to fully comply with all applicable anti-discrimination laws and regulations. In many jurisdictions, for example, it may not be allowed for a landlord to discriminate against renters who are single and favor those who are married. I also urge renters who are discriminated against, for improper reasons, to assert their rights.

Carefreeap
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Re: Rentals and Security Deposits

Post by Carefreeap » Sun Apr 15, 2018 10:08 am

One of the many reasons why I wouldn't rent to groups despite the extra money.

Deposit issues, constant turn-over in occupancy, and no one accountable for damage.

Not worth the hassle in my opinion.

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dm200
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Re: Rentals and Security Deposits

Post by dm200 » Sun Apr 15, 2018 10:22 am

Carefreeap wrote:
Sun Apr 15, 2018 10:08 am
One of the many reasons why I wouldn't rent to groups despite the extra money.
Deposit issues, constant turn-over in occupancy, and no one accountable for damage.
Not worth the hassle in my opinion.
Back when I was single (as described in previous post) and was denied rental from you, I would file a complaint of improper discrimination against you.

blevine
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Re: Rentals and Security Deposits

Post by blevine » Sun Apr 15, 2018 10:34 am

I rented a studio apartment to one person, back when I wanted to move out of a coop that I personally lived in, and couldn't sell during a down market.
Nothing but hassles even with 1 tenant.

Regardless, why would you even consider returning a sec deposit to anyone before their lease is up ?

Also as a parent of 2 students both renting off campus, both leases say the entire group is responsible for the lease,
even if someone leaves. For housing near campus, there was one option where effectively the landlord rented out rooms in an apartment,
they included utilies, let you take a suite with your friends but sign multiple leases, or they helped match with others needing a roommate.
Was run like a dorm but really apartments with common living areas. That was the exception and most options were for leases where all parties were named and responsible.

So as a landlord I would tell those who want to stay, I will only return sec deposit if all leave, or if you want to stay, you find
new roommates, pay the sec deposit for them, and I will then return to others. If the lease is written as group responsibility, then return of sec
deposit upon vacating the apartment is also a group responsibility. Group does not leave, apartment is not vacated.

Spirit Rider
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Re: Rentals and Security Deposits

Post by Spirit Rider » Sun Apr 15, 2018 10:41 am

Security deposits like most landlord tenant issues are highly dependent on state law. Hopefully, you are not in my state.

The Security Deposit (SD) can not be > one months rent. No 1st, last and SD allowed here.

A SD must be separate for each umarried leasee. A bond can be filed with the town or It must be deposited into an interest bearing savings account ITF the leasee with the name of the financial institution provided to the leasee within 5 days.

A larger landlord can handle it administratively, because
all SDs are handled under a single bond. It is a real hassle for small landlords with a change of roommates who are leasees.

So many small landlords pefer to rent to a single leasee with allowed roommates covered under lease language and addendums when they change. The ones that prefer to have all adult residents as leasees, require a non-trivial administrative fee and full inspection on change of roommates.

Spirit Rider
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Re: Rentals and Security Deposits

Post by Spirit Rider » Sun Apr 15, 2018 11:06 am

dm200 wrote:
Sun Apr 15, 2018 10:22 am
Carefreeap wrote:
Sun Apr 15, 2018 10:08 am
One of the many reasons why I wouldn't rent to groups despite the extra money.
Deposit issues, constant turn-over in occupancy, and no one accountable for damage.
Not worth the hassle in my opinion.
Back when I was single (as described in previous post) and was denied rental from you, I would file a complaint of improper discrimination against you.
And the complaint would go nowhere. Adults who are not a couple in and of themselves are not a protected class under the Fair Housing Act.

It is entirely permissable to have a policy limiting your allowed tenents to married couples, domestic partners, a specific limit to the number of single adults, including just one and their dependents. It needs to be consistently applied or could be grounds for a complaint from a protected class.

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dm200
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Re: Rentals and Security Deposits

Post by dm200 » Sun Apr 15, 2018 3:49 pm

Spirit Rider wrote:
Sun Apr 15, 2018 11:06 am
dm200 wrote:
Sun Apr 15, 2018 10:22 am
Carefreeap wrote:
Sun Apr 15, 2018 10:08 am
One of the many reasons why I wouldn't rent to groups despite the extra money.
Deposit issues, constant turn-over in occupancy, and no one accountable for damage.
Not worth the hassle in my opinion.
Back when I was single (as described in previous post) and was denied rental from you, I would file a complaint of improper discrimination against you.
And the complaint would go nowhere. Adults who are not a couple in and of themselves are not a protected class under the Fair Housing Act.
It is entirely permissable to have a policy limiting your allowed tenents to married couples, domestic partners, a specific limit to the number of single adults, including just one and their dependents. It needs to be consistently applied or could be grounds for a complaint from a protected class.
I disagree. It all may depend on applicable federal, state and local laws and regulations.

Spirit Rider
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Re: Rentals and Security Deposits

Post by Spirit Rider » Sun Apr 15, 2018 4:17 pm

dm200 wrote:
Sun Apr 15, 2018 3:49 pm
I disagree. It all may depend on applicable federal, state and local laws and regulations.
It is certainly permissible under the fair housing act and HUD regulations. So there goes the federal part.

I would like to see a law or regulation that says a landlord can't limit the number of non-cohabiting adults. Heck many Cities and towns have specific ordinances doing so. You are telling me that is discrimination, I think not.

To be discrimination it has be against a protected class. Multiple roommates in and of themselves are not a protected class.

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dm200
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Re: Rentals and Security Deposits

Post by dm200 » Mon Apr 16, 2018 9:20 am

Spirit Rider wrote:
Sun Apr 15, 2018 4:17 pm
dm200 wrote:
Sun Apr 15, 2018 3:49 pm
I disagree. It all may depend on applicable federal, state and local laws and regulations.
It is certainly permissible under the fair housing act and HUD regulations. So there goes the federal part.
I would like to see a law or regulation that says a landlord can't limit the number of non-cohabiting adults. Heck many Cities and towns have specific ordinances doing so. You are telling me that is discrimination, I think not.
To be discrimination it has be against a protected class. Multiple roommates in and of themselves are not a protected class.
BUT - I believe being single vs married (marital status) probably is.

ResearchMed
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Re: Rentals and Security Deposits

Post by ResearchMed » Mon Apr 16, 2018 9:31 am

dm200 wrote:
Mon Apr 16, 2018 9:20 am
Spirit Rider wrote:
Sun Apr 15, 2018 4:17 pm
dm200 wrote:
Sun Apr 15, 2018 3:49 pm
I disagree. It all may depend on applicable federal, state and local laws and regulations.
It is certainly permissible under the fair housing act and HUD regulations. So there goes the federal part.
I would like to see a law or regulation that says a landlord can't limit the number of non-cohabiting adults. Heck many Cities and towns have specific ordinances doing so. You are telling me that is discrimination, I think not.
To be discrimination it has be against a protected class. Multiple roommates in and of themselves are not a protected class.
BUT - I believe being single vs married (marital status) probably is.
The concern raised was about "groups" and how to handle security deposits, etc.
There wasn't a concern about not wanting to rent to a single person.

In several towns nearby, including where I owned regular rental properties (meaning, not short-term vacation rentals, which I also owned, elsewhere), there were strict regs about the number of non-related adults who could reside. It had to do with the number of single or married (it was "married" back then; probably has changed now) persons/couples units and number of separate bedrooms.
[I don't remember how adult siblings, etc., would have been "counted".]

How renters actually used the space was totally separate, and not monitored, of course.

RM
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Carefreeap
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Re: Rentals and Security Deposits

Post by Carefreeap » Mon Apr 16, 2018 2:58 pm

dm200 wrote:
Sun Apr 15, 2018 10:22 am
Carefreeap wrote:
Sun Apr 15, 2018 10:08 am
One of the many reasons why I wouldn't rent to groups despite the extra money.
Deposit issues, constant turn-over in occupancy, and no one accountable for damage.
Not worth the hassle in my opinion.
Back when I was single (as described in previous post) and was denied rental from you, I would file a complaint of improper discrimination against you.
Well good luck. None of the singles could afford to rent the unit on their own. This was a 1800 sq.ft. condo in the La Jolla Shores area of San Diego. It was renting for $3,500/mth last year.

I'm still allowed to discriminate against too low of income, bad credit, and number of people in my unit.

renue74
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Re: Rentals and Security Deposits

Post by renue74 » Mon Apr 16, 2018 3:14 pm

There's a college rental company who bought up a ton of housing around a small 6,000 student college in my town.

The rent by the room and have the parents guarantee the lease. Each tenant gets one bedroom in the lease and I think the company paid for the utilities up to X amount.

In my rentals, I always have a primary person on the lease and that's it. I also ask for the names of anybody who lives in the apartment and I can limit the number of folks living to 2 per bedroom per federal law.

Security deposits....I don't care, they give me the money....it's not my right to ask who paid what. I just want my total security deposit. I don't get into politics like that.

Carefreeap
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Re: Rentals and Security Deposits

Post by Carefreeap » Mon Apr 16, 2018 4:29 pm

renue74 wrote:
Mon Apr 16, 2018 3:14 pm
There's a college rental company who bought up a ton of housing around a small 6,000 student college in my town.

The rent by the room and have the parents guarantee the lease. Each tenant gets one bedroom in the lease and I think the company paid for the utilities up to X amount.

In my rentals, I always have a primary person on the lease and that's it. I also ask for the names of anybody who lives in the apartment and I can limit the number of folks living to 2 per bedroom per federal law.

Security deposits....I don't care, they give me the money....it's not my right to ask who paid what. I just want my total security deposit. I don't get into politics like that.
In my neck of the woods (CA & AZ) a landlord has 21 or 14 days to account for and/or return a tenant's deposit after vacating the unit. There are severe penalties for not doing so. Keeping track of who is currently occupying the unit and who is the responsible party for the deposit would seem to be a lot of work. I'll also add that for practical reasons I'm not going to release a deposit without doing an inspection of the unit. Too easy for someone to blame someone else for damage and tough for me to prove otherwise if there are other people living in the unit.

Maybe if I had beater rentals I wouldn't care and just chalk it up to the cost of doing business.

LeftCoast
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Re: Rentals and Security Deposits

Post by LeftCoast » Mon Apr 16, 2018 4:30 pm

I have a number of two-bedroom units that are occupied by two roommates. When one roommate wants to move out, and a replacement roommate wants to move in, I tell the tenants that I will continue to hold the security deposit that was originally posted, and that the departing roommate should get their security deposit from the replacement roommate. We have an agreement that documents the substitution of the replacement roommate for the departing roommate.

renue74
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Re: Rentals and Security Deposits

Post by renue74 » Mon Apr 16, 2018 4:48 pm

Carefreeap wrote:
Mon Apr 16, 2018 4:29 pm
renue74 wrote:
Mon Apr 16, 2018 3:14 pm
There's a college rental company who bought up a ton of housing around a small 6,000 student college in my town.

The rent by the room and have the parents guarantee the lease. Each tenant gets one bedroom in the lease and I think the company paid for the utilities up to X amount.

In my rentals, I always have a primary person on the lease and that's it. I also ask for the names of anybody who lives in the apartment and I can limit the number of folks living to 2 per bedroom per federal law.

Security deposits....I don't care, they give me the money....it's not my right to ask who paid what. I just want my total security deposit. I don't get into politics like that.
In my neck of the woods (CA & AZ) a landlord has 21 or 14 days to account for and/or return a tenant's deposit after vacating the unit. There are severe penalties for not doing so. Keeping track of who is currently occupying the unit and who is the responsible party for the deposit would seem to be a lot of work. I'll also add that for practical reasons I'm not going to release a deposit without doing an inspection of the unit. Too easy for someone to blame someone else for damage and tough for me to prove otherwise if there are other people living in the unit.

Maybe if I had beater rentals I wouldn't care and just chalk it up to the cost of doing business.
Our state is pretty strict about security deposits. We must return them within 30 days and include a detailed letter of any expenses taken out of the deposit to repair any damages.

I'm just noting that with my rentals, one lease, one security deposit, one responsible tenant on lease. If they choose to have a roommate, fine...but the primary must match my requirements.

Spirit Rider
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Re: Rentals and Security Deposits

Post by Spirit Rider » Mon Apr 16, 2018 6:37 pm

dm200 wrote:
Mon Apr 16, 2018 9:20 am
Spirit Rider wrote:
Sun Apr 15, 2018 4:17 pm
dm200 wrote:
Sun Apr 15, 2018 3:49 pm
I disagree. It all may depend on applicable federal, state and local laws and regulations.
It is certainly permissible under the fair housing act and HUD regulations. So there goes the federal part.
I would like to see a law or regulation that says a landlord can't limit the number of non-cohabiting adults. Heck many Cities and towns have specific ordinances doing so. You are telling me that is discrimination, I think not.
To be discrimination it has be against a protected class. Multiple roommates in and of themselves are not a protected class.
BUT - I believe being single vs married (marital status) probably is.
Nope. The presence or anticipated presence of children under 18 in a household is a protected class. Marital status in and of itself is not a protected class.

SouthernCPA
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Re: Rentals and Security Deposits

Post by SouthernCPA » Tue Apr 17, 2018 10:51 am

I'd just have one annual lease with all roommates listed on the lease. With that one lease is one security deposit that gets returned and made out to all roommates on the check. Let the roommates sort it out as far is who is paying what amount of rent/expenses/deposit, but from your end, no deposit is returned until the lease is up and the inspection has been completed. Any other alternate arrangement can be worked out among the rooomates. If one moves out at renewal, do an assessment at that point and determine how much of the deposit will be returned and have a new lease signed with new tenants names on it and a "fresh" security deposit related to that lease.

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