I have a first time situation that is happening in the ten years of being a LL. One tenant is moving out while the other is remaining. The T staying is fully capable of covering the rent and utilities.
The only two steps to take that I can think of are: 1. Email the tenant 'back' (she email me of her leaving) citing she must work out the returned deposit with the other tenant, as I am keeping the full amount. 2. Email the tenant staying to see if in fact she is staying and re-write the lease with only her name. 3. Review the rental insurance paperwork to clarify the T staying has it in her name.
Is there anything else I am missing? Advice is appreciated, thank you.
There are a few other things you might consider...
You said you plan to email the tenant to work out the deposit with the other tenant. I suggest you send the same communication to both tenants.
You feel that there is sufficient damage that the full security deposit will very likely be kept when the unit is finally vacated. That also means that while the remaining tenant is in the unit, you will not have any security to cover additional damage or last month's rent in case she decides not to pay. That would certainly bother me. I suggest as part of allowing the remaining tenant stay that an agreement be reached as to taking care of some or all of those repairs. Keep it separate from the security deposit and make it with both tenants. That will 'free up' the security deposit again.