Bank Check Dilemma; Very Strange Situation. Advice Please

[erkevin]

Here is a weird one (I think). My DS has been living in Austin, TX working on his doctorate for the past two years with three other doctoral students. When they signed the lease, family members including myself, paid the security deposits (nearly $4k total). The lease ended 8/30 and the four young students moved out to complete their field work. On Friday, I received a bank check from the landlord for the entire security deposit with the notation that I am to deposit the check and distribute the security deposits back to the others. That would be fine except.....the check is made out to all of the security deposit contributors with the word "and" between the names. I emailed the landlord and said that this was not feasible. Was told that the security deposit has to be returned in one check ("by TX law") and because it is a bank check, she will not re-issue it with "or".
I signed the check and deposited it via bank app. It was not immediately rejected, but that doesn't mean much. If it is rejected for improper endorsement, what are my options? I don't know any of these people and they live in Texas and Louisiana. To mail the check to receive a series of signatures sounds time-consuming and risky. Any ideas?

 

[pb4uski]

According to Perplexity AI, the landlord is mistaken. Also, what the landlord claims doesn't make any sense. Return the check to her and tell her to issue separate checks unless she wants to invite complaints to state regulators or legal action.

Does a lease security deposit have to be returned in a single check under Texas law?​

Answer
Under Texas law, there is no specific requirement that a security deposit must be returned in a single check. The key requirements for returning a security deposit in Texas are:

1. Timing: The landlord must return the security deposit (or any remaining portion after lawful deductions) within 30 days after the tenant surrenders the property and provides a forwarding address.
2. Itemization: If any deductions are made, the landlord must provide an itemized list of those deductions along with the remaining deposit amount.
3. Method of return: The law does not specify that the deposit must be returned via a single check. It simply states that the landlord must "refund" or "return" the deposit.

While not explicitly required by law, returning the full deposit amount in a single check is generally considered the most straightforward and common practice. However, if there are legitimate reasons to split the refund (e.g., multiple tenants with separate forwarding addresses), it would likely be acceptable to issue multiple checks as long as the full amount is returned within the required timeframe. The most important factors are:

1. Returning the full amount owed (minus any lawful deductions)
2. Doing so within 30 days
3. Providing an itemized list of any deductions made

As long as these key requirements are met, the specific method of payment (single check vs multiple checks) is not dictated by Texas security deposit law.

 

[Texas Proud]

Agree with above... the landlord is being lazy...

And from my dealings with landlords in Austin that deal with students, they are really bad at what is legal... they are used to dealing with students that do not know any better... well, and it seems parents that do not know either...

Let me ask though... did everybody sign a single lease? I had my DD only go into places where she rented a room and we did not have to deal with the other tenants... if a single lease maybe they have some ability to say we are paying back 'the tenant' as signed on the lease...

 

[erkevin]

Pretty sure they were all on the same lease. When i went into apartments.com, everyone's monthly rent payments were there (visible).

 

[RetiredAndLovingIt]

Here is a weird one (I think). My DS has been living in Austin, TX working on his doctorate for the past two years with three other doctoral students. When they signed the lease, family members including myself, paid the security deposits (nearly $4k total). The lease ended 8/30 and the four young students moved out to complete their field work. On Friday, I received a bank check from the landlord for the entire security deposit with the notation that I am to deposit the check and distribute the security deposits back to the others. That would be fine except.....the check is made out to all of the security deposit contributors with the word "and" between the names. I emailed the landlord and said that this was not feasible. Was told that the security deposit has to be returned in one check ("by TX law") and because it is a bank check, she will not re-issue it with "or".
I signed the check and deposited it via bank app. It was not immediately rejected, but that doesn't mean much. If it is rejected for improper endorsement, what are my options? I don't know any of these people and they live in Texas and Louisiana. To mail the check to receive a series of signatures sounds time-consuming and risky. Any ideas?

I doubt that it will be rejected but if it is, I would think it's the landlords responsibility to get the funds back to the correct parties and reimburse you for any costs you have incurred. You can then Zelle them the money quickly with just their phone number or e-mail address.or via whatever payment app that your bank uses. I've used Zelle a few times and it's instant. I don't pay strangers, so far just the gardener, family and neighbors if we're sharing a cost. Maybe warn the landlord that this is your expectation if there is any problem with a rejected check.

 

[erkevin]

I am certainly hoping the check will clear. My guess is that it will take less time than normal check clearance because the issue is not the available funds. The money was made available to me within 24 hours but I am reluctant to send the money yet in case the issue is noticed at the clearinghouse.
Yes, the plan was to Zelle them

 

[ERD50]

I'd bet that the only way it would be rejected after the fact is if the landlord complained to your bank after he gets debited (and he won't it seems). Seems that the banks really don't care, they go with the automatic system unless someone complains.

Just to be safe, and keep things easy, can you keep a balance large enough to cover it being clawed back for the next few months, just to avoid fees, overdraws, and the hassle of dealing with the overdraws, etc?

 

[erkevin]

Regarding ERD50's response, I dont think the landlord cares and I am thinking the check will clear. Here is my nightmare; check clears and I pay the other tenants. A month goes by and boom, my account is debited the amount of the check. Now I am out the three security deposits already distributed plus my amount.

 

[Aerides]

ACH is automatic and started when the deposit was accepted. Unless someone actually looks at the check and decides something is up (unlikely) it will clear. Or if the landlord decided to dispute it, but even then, super unlikely.

Still, I would give it at least a week before you start sending the funds to the others.

 

[Texas Proud]

Not really.... the receiving bank can reject it if all the "ands' did not endorse... it is not the deposit bank that the OP needs to worry about...

I had an 'and' check and it took awhile to be rejected... it was payment from my insurance company for hail damage to my car and house... the lienholders were included as 'ands'.... I had to get someone on their side to endorse them and send them back to me to get deposited...

The car lienholder made me go to a local dealer so they could look the car over and report back that the damage was 'repaired' to their satisfaction....

 

[pb4uski]

Regarding ERD50's response, I dont think the landlord cares and I am thinking the check will clear. Here is my nightmare; check clears and I pay the other tenants. A month goes by and boom, my account is debited the amount of the check. Now I am out the three security deposits already distributed plus my amount.

Yes, that is the risk that I see. Perhaps you can contact the landlady and confirm that the check has cleared her bank... in that case I think you would be all set.

 

[erkevin]

As Texas Proud stated; it is the receiving bank (BofA) I am concerned about. They issued the check with the "and" and are likely the cog in the chain that will object to the missing endorsement. Since it was a bank/cashiers check, the landlord will not see the check again.

 

[38Chevy454]

I think if you deposit as "deposit only" with just your account number, there isn't a way for receiving bank to know whether all the names are on the deposit account. So low risk of it being rejected if endorsed and deposited that way.

 

[Texas Proud]

I think if you deposit as "deposit only" with just your account number, there isn't a way for receiving bank to know whether all the names are on the deposit account. So low risk of it being rejected if endorsed and deposited that way.

Not really.... if a one party check they do not care about endorsements.... but an 'and' check they do... well, usually if the machine catches it...

The bank has liability here.. well, along with the OP and the landlord.... but the other parties if not paid will likely go after the bank...

If you Google it, a lot of articles about contractors and subs come up... look up joint checks...

 

[erkevin]

One week later, the check has not been rejected. Haven't paid the security deposit to the others or moved/spent any of the money. I've kept everyone in the loop. I think another week of patience is in order.

 

[Finance Dave]

I can't speak about the law, but I was a LL for 15 years and dealt with this issue in Indiana this way...

Our lease (after I changed it) clearly stated that any security deposit refund would be sent to the FIRST PERSON listed on the lease...and I always asked the multiple tenants who they wanted first on the lease for this reason...then they can fight it out.

The problem with sending multiple checks is this...

Let's say Joe and Bill are unrelated friends that live together and pay a deposit of $1,000. At move out, I inspect the house to find a water-damaged floor area in the living room. I don't know what caused the damage or who was at fault...and I really don't care. I just want reimbursed for it. For me to deduct it from one person's deposit or the others would be a judgment call I can't make. This happened once, and each tenant blamed the other for the damage. Our lease got rid of this issue.

another possible option (although still a bit messy) is to check with someone about using Docusign to see if you can get them to sign off remotely for the deposit, and you can write them a hand-written contract stating you will then mail each of them a check for their portion. This requires you to write out multiple checks...but that's essentially what you're asking the LL to do.

 

[pb4uski]

^^^ but in the OP, the landlord claimed that by law that they had to send a single check.

It seems to me that there isn't much difference between your sending a single check and they can fight it out or sending multiple checks to muliple tenants and then the tenants fight out who gets dinged for any reductions in the damage deposit.

You could have just as easily had your lease state that in the event of multiple tenants that the security deposit would be paid pro-rata and that any deductions for damages would also be applied pro-rata.

 

[erkevin]

Update: two weeks in. Check has not been returned. My plan is to wait until this coming Wednesday to distribute the funds. That is not any magic date that guarantees the check won't still be rejected; it is just a balance between that likelihood and the needs of the other tenants. I will, of course, keep additional funds in my account to cover in case of worst-case scenario.

 

[pb4uski]

Do the other recipients understand and agree that if the check is later returned that you will be seeking to be reimbursed?

 

[erkevin]

Not discussed. But a good point. I guess my thinking (and risk) was that I would collect the necessary signatures and re-deposit the check to get the money. All-in-all, a very unpleasant situation with this check.

 

[Jerry1]

ACH is automatic and started when the deposit was accepted. Unless someone actually looks at the check and decides something is up (unlikely) it will clear. Or if the landlord decided to dispute it, but even then, super unlikely.

Still, I would give it at least a week before you start sending the funds to the others.

^^ This ^^

Let this one go - no need to let it distract you. It should only take a couple days to fully process. Once the hold is off your account, reimburse the others. You'll be fine.

 

[isisdave]

I'm not suggesting forgery, but if it comes to needing more endorsements, the bank has no idea what the others' signatures look like. Maybe they realize this and figure there's not much point in demanding more endorsements.

 

[erkevin]

I'm not suggesting forgery, but if it comes to needing more endorsements, the bank has no idea what the others' signatures look like. Maybe they realize this and figure there's not much point in demanding more endorsements.

I am releasing the money tomorrow. If it blows up on me later, I will see about getting their signatures and just photoshopping them on the check. It will be electronically deposited (again). However, it has been 2.5 weeks and I am feeling confident that the check has fully cleared.

 

[erkevin]

Everyone has been paid, check has not been rejected at 3.5 weeks........................

 

[erkevin]

5 weeks in the clear. Thank you to everyone for their input.