I own only 1 rental property in Virginia. I collected a security deposit in cash from the husband at the time the lease was signed by both the husband and wife. The lease is about to expire and they are getting a divorce. He's moving out but she would like to stay. I'm not sure how to handle the security deposit. While it was cash and he physically handed it to me it was for both of them to rent the house. Do I have to return the entire amount of the security deposit to the husband and collect a new security deposit from the wife? Do I give him half of the security deposit back, collecting the other half from the wife? Or do I keep all of it and make the husband get the security deposit from his wife?
The security deposit follows the rental, you don't have to split it up.
He gave it to you--give it back to him and if remains, get a new SD from her. She should take her claim on the SD to her future former husband. Let the divorce court decide that issue and you stay clear.
The security deposit was for them both and came from marital assets. As long as one of them remains in the apartment, you do not have to do anything with the security deposit. If the husband wants to make an issue of it, it would be between him and his wife, but it would not concern you.
If the divorce is not finalized when they will both be leaving the property, I would suggest discussing with an attorney about the filing of an interpleader action. This is where you hold on to the funds, and essentially tell the court that you have the money to return to one of them, but you do not know to whom it should legally be returned, so they need to fight it out in order to make sure you provide it to the correct person. Then, the two will actually fight it out with an order being issued to tell you to whom to legally deliver the funds.
AS may seem clear from the previous attorneys' responses, there is some disagreement of opinion on how this type of situation should be handled as a legal matter. We are all family law attorneys and, under family law, the answer is that the security deposit (or the right to share in the security deposit once returned) is in all probability a marital asset that would be subject to division by the court IN THE DIVORCE SUIT, to which you are not a party.
This aspect, however, is not really your concern or your responsibility. As far as you are concerned, the question is what does your lease with the tenants provide for. My guess is that it says that the security deposit, less any damages, will be returned to the tenants (plural) upon the expiration of the lease and vacation of the property -- not the vacation of one or some of the tenants. If that is what the lease provides for (return of security deposit at termination of lease and vacation of the property), then you have no contractual obligation to return the security deposit until those terms have been met.
So, here is what I would suggest as a practical solution (and one that is usually employed by large rental companies when unmarried co-tenants are on a lease, but only one or some of the co-tenants is renewing the lease):
(1) If the lease terms is expiring, then you could treat like a brand new transaction. Have a new lease prepared for the remaining tenant that they will need to sign and provide a security deposit for, upon the receipt of which you return the security deposit in the form of a check payable to both lessees (and let them sort it out from there) OR as they may otherwise instruct you IN WRITING SIGNED AND NOTARIZED BY BOTH OF THEM; OR
(2) Treat as an assumption of the lease by one of the parties, in which case one party assumes all further responsibility for the lease obligations and the other party releases their interest in the security deposit.
Realistically, if the parties are in agreement between themselves that one is staying and one is moving out, then it may suffice to just have a talk with them to let them know that you are willing to rent to the one party alone but that you will require the full security deposit in order to do that and ask him how they were intending to handle that issue. It really should not matter from a practical stand-point whether you give half the money back and then get an equal amount in return from the remaining spouse or if the spouse who is going to remain simply pays an amount equal to 1/2 the security deposit to their spouse directly.
Regardless of whether it is a new lease or an assumption of lease that is done, as a landlord it is a good idea to have an attorney prepare either the new lease or the assumption and release document for you in order to ensure that it is legal and enforceable and complies with Virginia landlord-tenant law.
