Who gets security deposit in divorce?

Landlord panics after ex-tenant threatens property damage

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Inman Connect New York | January 29 - February 1, 2019

Q: Our tenants are currently on a month-to-month rental agreement and apparently have just gone through a separation and divorce. He left several months ago and she and the children have been in the house for the past nine months. She has paid the rent and the utilities and has maintained the place in good order. She had more money coming in during the separation and now that the divorce is final, she tells me that she has less income from her ex-husband so she needs to move to a less expensive home.

She gave me a written notice last Friday that she is moving at the end of the month, and the ex-husband showed up last night at my house and angrily demanded that he get the full security deposit back right then and there. I told him I couldn’t do that, but he insists that if he does not get the security deposit back in the next 72 hours, he will damage the house.

He has not contacted me again, but his actions have made me think about who would be entitled to the return of the security deposit. The original lease was signed four years ago, and they have been on a month-to-month lease beginning the second year. She called me in October and told me that he had left and that she would be paying the rent in the future. At that time, he did not ask for the security deposit back. Who is entitled to the deposit, assuming that he does not really damage the property?

A: While your situation is full of drama, the answer is actually quite simple. Once the rental house has been vacated, you should go through and inspect it just like you would for any move-out. You then will determine the proper amount of the refund, if any. Be sure to send the security deposit reconciliation report to the attention of both the husband and the wife at their last-known addresses, which may be your rental house.

If there is a check for any remaining security deposit, you should make the check payable to both the husband and the wife, as they were both parties to the original lease. If they have separate addresses, I would suggest that you send the original security deposit accounting and the check to the wife as the current occupant with a copy to the husband. They could have avoided any confusion if they had provided you with a written agreement that indicates that one of them has relinquished any claim to the security deposit.

Often in dissolution actions, the court may order that the security deposit is the sole property of one spouse, but you should comply only with a court order and not verbal representations or you could find that the aggrieved spouse will be demanding the security deposit or threaten to take you to small claims court. …CONTINUED

In many instances where you are presented conflicting information that seems credible, it may actually be better to go to small claims court and let the court decide who is to receive the security deposit refund. I think that you should not ignore the irrational behavior of the husband coming to your home and threatening to damage the rental home if you didn’t give in to his demand for the security deposit.

You should notify your local law enforcement and you may also want to contact the wife so she is aware, as she could be held legally responsible by you for any damage to the rental home at the time of move-out. If the damage happens after she vacates, then law enforcement may want to start their investigation with contacting the husband.

Q: If I pay rent monthly but have signed a one-year lease and need to get out early, can I just give 30 days’ notice?

A: No, a lease is a binding contract. Contact your landlord and let her know your situation and see if she can work with you. She is not required to let you out of the lease and you are responsible for all rent through the balance of the lease.

If you leave, the landlord is legally required to mitigate or minimize your damages by making a reasonable effort in good faith to re-rent your rental unit. There is no guarantee that she will be able to make the unit rent-ready, advertise it, and locate and screen a new qualified tenant before the expiration of your lease. You are responsible for all rent, advertising/marketing and other costs incurred by the landlord due to your breach of your lease. However, the landlord cannot collect double rent.

You may be better off reaching an agreement or settlement with your landlord for a fixed amount as a lease-termination fee. Some landlords even have this clause in their lease, but even if your landlord doesn’t you can see if she’d be willing to consider it.

Your situation is a good reminder for all tenants who think that the lease somehow binds the landlord but not the tenant. It is true that the landlord cannot terminate the lease without cause or change the terms (i.e., raise the rent), but the tenant cannot take advantage of these benefits and simply and unilaterally decide to terminate the lease with just a 30-day notice. Tenants should sign a lease only when they are confident that they will be able to completely fulfill their obligations for the entire term. If there is a chance they may need to terminate early, then they should negotiate that upfront with the landlord.

This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and "Property Management Kit for Dummies" and co-author of "Real Estate Investing for Dummies."

E-mail your questions to Rental Q&A at rgriswold.inman@retodayradio.com.

Questions should be brief and cannot be answered individually.

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