Renters who share living space with roommates other than a spouse or partner are not uncommon. Cohabiting is a way for singles to manage their housing expenses, and many people enjoy the company of a roommate or two. Renting an apartment or house to two or more individuals substantially broadens the pool of tenants who can afford your rental by pooling their income. Proper property management is of the essence here.
However, renting an apartment or house to roommates can open the door to a host of quandaries if the roommate relationship turns sour, and issues or problems arise. That’s where proper property management comes in. While landlords can benefit from most roommate tenancies, clear expectations need to be established and communicated to roommate tenants regarding responsible co-tenancy, including their obligations to the landlord, other tenants, and tenancy rules in order to (hopefully) prevent any unwelcome conduct or behavior.
Establish Roommate Guidelines:
Neglecting to establish roommate guidelines before you allow new tenants to sign a lease can place your property, your other tenants, and your rental income at risk. Here are some important property management tips for handling roommate tenancies and protecting your interests.
First things first: it’s always a very good idea to carefully evaluate potential roommates during the tenant screening process and discuss with them how they would de-escalate a conflict if one arises between them before it things become volatile.
Ideally, the roommates have done their due diligence before agreeing to share living space and feel confident that they understand each other’s expectations and respect each other’s property and space. They enter into the lease after one or more (more is better) in-depth discussions about their individual perceptions and presumptions regarding the home environment they anticipate in their shared living arrangement, and their responsibilities to each other. In a perfect world, both tenants feel confident they can cohabitate harmoniously and are completely comfortable with their decision to be roomies.
Sometimes, unfortunately, despite the best intentions, living with a friend, a family member, or even a new acquaintance can unexpectedly morph into a strained relationship under the pressure of conflicting personalities, poor communication, and dashed expectations. Things can get ugly.
As a landlord or property manager, you need to prepare for a possible roommate meltdown, and by this, we mean having an uncompromising strategy and protective measures in place to implement damage control, or better yet, avoid the probability of a roommate blowout altogether. Here are some important tips to include in your strategy:
Execute Comprehensive Tenant Screening & Strict Sub-Leasing Requirements:
Every individual 18 years or older who will be a tenant on your property should be obligated to participate in your tenant screening process before move-in, no exceptions. This is particularly important for roommate applicants, which any Judge Judy episode will confirm. Screening all tenants is critical for selecting the most qualified renters with verifiable income and a good rental history. The better they perform in the screening process, the more likely they are to be inclined to abide by tenancy rules, and the less likely they are to cause trouble.
Tension between roommates can often arise as a result of financial stressors or rule-breaking tendencies; screening tenants carefully and thoroughly is your best bet for weeding out people who may be trouble-makers or rule breakers. Applicants who pass your screening criteria without difficulty and make a positive impression are the tenants you’re after. Of course, there may be trouble-makers who have mastered making a good impression when they need or want to. But if your screening criteria are top notch, you’ll have indicators to help you spot a potential problem tenant before he or she can hoodwink you.
The Protective Powers of Clearly Articulated Lease Language (Jointly & Severally Liable):
As a landlord or property manager, enforcing the terms of your lease should be your A-number-1 top priority when it comes to tenant management. A standard lease agreement needs to clearly outline the rules of the tenancy, the duration of the tenancy, when and how rent payments are to be made, and property upkeep expectations. Every tenant of legal age should be required to sign the lease and agree to its legally enforceable terms.
Never stray from enforcing your lease agreement terms, no matter what the circumstance. To do so can severely weaken legal protections in place to safeguard your interests.
Joint liability offers you the most protection, as it ensures that your lease agreement states that all tenants are “jointly and severally liable.” All tenants are held equally responsible for complying with all lease agreement obligations. This protects landlords and property managers against roommate disputes that result in property damage or withheld rent. For example, if one roommate fails to pay their share of the rent one month, all roommates will be responsible for the full rent payment, and subject to the consequences if they don’t cover the non-paying roommate’s share. Consequences can range from late fees to eviction.
Security Deposits Shared by Roommates:
Inform your tenants when they sign the lease that security deposit funds are released upon move-out only after the property has been vacated, and a move-out inspection has been conducted to evaluate the unit and check for any property damage. A joint liability agreement is significant when it comes to security deposits and property damage. Regardless of which roommate is to blame for any damage, all tenants are responsible for damage deductions, which can include unpaid rent, repairs for damage beyond normal wear and tear, and in some states cleaning services if they’re needed after move-out. This spares landlords and property managers the headache of becoming embroiled in he-said-she-said situations and permits them to simply extract damage deductions from the joint tenant security deposit.
If one roommate moves out before the other, make sure never to return a portion of the deposit mid-tenancy. By doing so, you can end up with no reserve if damages are discovered after the second tenant leaves.
Here is a sample roommate agreement that spells out the conditions for security deposit refunds when one co-tenant moves out before the lease expires. Here is a summary of those conditions:
- The cotenant (roommate) who moves out before the lease expires (voluntarily or involuntarily) will get his or her share of the security deposit returned, minus costs of unpaid rent, repairs, replacement, and cleaning attributable to the departing tenant, when and if an acceptable replacement cotenant signs the lease and contributes his or her share to the security deposit. If an acceptable co-tenant cannot be found, the early-departing tenant will not receive any portion of their share of the security deposit until the tenancy of the remaining co-tenant(s) is over, and the security deposit is refunded, in whole or in part, by the landlord or property manager.
The Risky Business (if you’re not careful) of Subleasing Agreements:
Should one tenant decide to move out before the end of their lease, they may look to secure a sublease agreement in the hopes that a new tenant (roommate) can be found to cover the vacating tenant’s rent payments until the lease is over. While some cities require landlords to entertain reasonable subleasing requests, subleasing can pose a risk to landlords. Since the new tenant’s name is not on the original lease agreement, sublessors are generally not jointly and severally liable for rent or damages.
If you choose to allow sublets or allow a tenant to move out early if they find a replacement roommate, make sure to follow the same comprehensive tenant screening process you normally require for a new applicant. Draw up a new lease or attach an addendum that names the new tenant jointly and severally liable along with the remaining tenant(s) to the lease agreement. By including everyone on the lease, you have a legally binding document to enforce the terms of the lease and maintain the joint liability clause for all tenants.
Additional Precautions: The Roommate Agreement That Doesn’t Involve Landlord or Property Manager Enforcement:
You may want to consider suggesting this to your new roommate tenants. Roommate Agreement can be developed and drafted by the roommates themselves. Although landlords and property managers are not involved with the terms or enforcement of such an agreement, it’s easy to see how it benefits them nonetheless. The agreement can facilitate a meaningful dialogue between the roommates, and from there it can be recorded as an informal contract for collaborative cohabitation. The agreement should define and clarify each roommate’s expectations and priorities. It should provide an opportunity not only to express their perceptions of the environment in which they want to live but also to formulate a mitigation plan should any serious disagreement or simmering annoyance create conflict between them during the tenancy.
Encouraging your tenants to develop a Roommate Agreement together can be a real gift for them, as well as you. Entering into the tenancy with a mutually crafted Roommate Agreement can equip them with a heightened awareness of what makes each other tick, and a carefully collaborated strategy for mitigating or even avoiding conflict during their cohabitation, with a shared goal of living in an accommodating environment.
Renter’s Insurance for Everyone’s Peace of Mind:
Renter’s insurance is another important suggestion you can offer to your tenants, and it may benefit you as well.
To fully guarantee that your tenants will be able to cover the costs of any damages they cause, renter’s insurance provides an affordable dose of protection. For instance, should one tenant leave the door unlocked and as a result, they incur property theft, or should a tenant forget to turn off a faucet leading to water damage, renter’s insurance can cover the cost of stolen belongings, as well as damage repairs for which both tenants would have been jointly responsible.
Renting to roommates is likely inevitable for landlords and property managers with vacancies to fill and tenants who need the financial assistance that shared rent payments provide. You can benefit from renting to roommates as long as you safeguard your interests by establishing clear expectations of your tenants, adhere to ironclad lease agreement terms that protect your income and property, and stick to a comprehensive tenant screening process with each and every new applicant; including sublessors.
The Final Verdict on Property Management Rental Tips
By following the tips from RentVest property management in this blog, you have an excellent opportunity to welcome new renters who will enter with a full understanding of their responsibilities, and property owners can rest assured their investments are protected.