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Good afternoon. The security deposit would need to be refunded, if the lease ended and a new lease was signed, involving different parties. Here, Tenant C had previously given a security deposit and they no longer reside there. As such, they would be entitled to their share back ( I am not sure how it was paid by A,B and C to begin) but it should have been returned since the lease was not renewed, since the tenants did not remain and a new lease was entered into, with just A and B. You could then demand a new deposit for A and B, since C is entitled to their deposit back or a portion thereof.