[VA] Can I keep a tenant’s security deposit as part of a lease termination agreement when they break the lease early?

Lexi, Chatbot

I understand that dealing with lease agreements can be quite challenging. Have you already discussed the terms of the lease release agreement with your tenants?

Lexi, Chatbot

What specific reasons are your tenants providing for wanting to end their lease early?

Queeneth E. Esq

Hello and welcome to this service. My name is Queeneth. I am an attorney with over 8 years of legal experience. I will do my best to assist you today. First I need to ask you a few questions to give you the best answer. (Kindly note that our conversation does not establish an attorney-client relationship.)

What state or country is the rental property located in? Does your lease agreement specify any conditions or penalties for early termination or how the security deposit should be handled in such cases?

Queeneth E. Esq

Please allow me some time to prepare a response. I will get back to you shortly. Thank you for your patience.

Queeneth E. Esq

In Virginia, do not automatically give the security deposit back, and do not automatically keep it either. You can keep only the amount the law allows, and then you must send a written itemization and any remaining balance within 45 days after the tenancy ends or they vacate, whichever is later.

Under VA Code § 55.1-1226, the deposit may be applied only to: accrued rent, damages beyond ordinary wear and tear, other damages or charges provided in the rental agreement, or actual damages for breach of the rental agreement. If the tenants are ending early, the statute also says they can be liable for actual damages for breach, and you may retain the security balance to apply against their financial obligations under the chapter or rental agreement.

Virginia also says actual damages for breach may include rent that would have accrued until the lease ends or until a new tenancy begins, whichever comes first, and you still have a duty to mitigate damages by trying to re-rent. (Va. Code Ann. § 55.1-1251)

So, for your release agreement: If you and the tenants agree to a 2-month lease release fee, the safest drafting is to say that fee is the full agreed settlement for early termination, and then say exactly how the security deposit will be treated. If you want to keep the deposit as part of that fee, say so explicitly:

“The security deposit shall be applied toward the agreed lease release fee, and any remaining balance shall be refunded in accordance with Va. Code § 55.1-1226.”

If the deposit is more than what you are allowed to keep after applying it to the agreed fee and any lawful deductions, you should return the remainder. If the tenants tell you to keep it as “half the fee,” get that in the signed written release. Oral understanding is much weaker.

The part of your template saying the deposit is returned in “30 days of the statutory timeframe under law, whichever greater” is not tracking Virginia’s statute very well. Virginia’s rule is generally 45 days, not 30.

The cleanest approach is to choose one of these structures in the release:

• Option A: Release fee = 2 months’ rent. Security deposit is not part of the fee and will be handled separately under the statute.
• Option B: Release fee = 2 months’ rent. Security deposit is credited toward that fee. Tenants pay only the difference, if any. Any excess deposit is returned under § 55.1-1226. That avoids later arguments over whether you “double charged” them.