The average rental rates continue to rise nationwide, and the percentage of people living with someone other than their spouse or partner also continues to increase. As such, it is important for property owners to understand what it means to lease their rental property to roommates. Today, we will discuss five crucial things landlords should know about renting to roommates and how to protect yourself in this scenario proactively.
Contents of This Article:
- Is Renting to Roommates a Good Idea?
- Top Things to Know Before Renting to Roommates
- Manage Your Rentals With BMG
Is Renting to Roommates a Good Idea?
Although your tenant pool significantly widens when you allow roommates to enter into a lease agreement together and reside in your rental property, this type of situation does come with its share of concerns. In fact, agreeing to lease to roommates puts you, your property, and your income at a higher risk.
When two people enter into a legal agreement to lease your rental property, they technically become co-tenants. This means that each tenant has the same legal rights and responsibilities when it comes to residing in your property. Additionally, it means that one bad tenant can affect the entire tenancy agreement and potentially bring you down with it.
Although there are risks, that doesn’t make renting to roommates a bad idea. It can actually be beneficial for both parties. However, it’s crucial to understand the risks and take preventative measures to ensure there are no hiccups. For instance, you’ll want to take tenant screening seriously and encourage a roommate agreement between each tenant.
Additionally, it’s important for landlords and Northern Virginia property management companies to know what to do if one roommate refuses to pay, wants to leave the rental, or breaches the lease terms. Next, we’ll go over some of the top things to understand before renting to roommates.
Top Things to Know Before Renting to Roommates
If you’re debating whether or not you should rent to roommates, consider all the pros and cons. Additionally, you’ll want to know how to mitigate risks and handle each situation according to the law. Below are some key things you should know before taking the plunge and allowing roommates to lease your rental property:
- Tenant Screening and Lease Agreement Considerations
- Security Deposits and Joint Liability
- What Happens If One Roommate Refuses to Pay?
- Breach of Lease Terms By One Roommate
- Recommend a Roommate Agreement
Tenant Screening and Lease Agreement Considerations
Typically, when a family applies to lease your rental property, you require every tenant over 18 to submit an application. However, you do not always screen each tenant residing in your property. For instance, if a tenant has adult children living with them that will not be responsible for the rent payment each month, you may forgo such a strict tenant screening on them.
However, if you’re renting to roommates, it is imperative you run thorough background checks on both parties since both tenants will agree to pay rent each month. Make sure that each applicant has the right qualities you are looking for and does not exhibit any red flags that may harm your rental property business in the long run.
In addition, it is important that you employ the help of an experienced property management company to structure a legally compliant roommate lease agreement. Since each roommate will be legally responsible for residing in your property, you must set clear expectations from the beginning. Additionally, you’ll want to ensure each roommate understands their role in the tenancy.
Adding this language to the lease agreement will ensure that each tenant is held equally and fully responsible for the terms and provisions outlined in the lease agreement as a single entity. This way, should one tenant come up short on rent, damage property, leave, or breach the lease agreement in any other way, the other tenant can and will be held fully responsible if legally applicable.
Security Deposits and Joint Liability
When it comes to security deposits and roommates, all tenants are responsible for damage to the property at the end of the lease term, regardless of who caused said damage. In essence, you are combining both roommates’ portion of the security deposit, making it a “whole,” and using the correct amount of funds at the end of the lease term to pay for unpaid rent or damages incurred.
If one roommate leaves the property before the end of the lease term, you should not return his or her portion of the security deposit until another roommate signs a lease agreement with the remaining tenant. If a new roommate cannot be found, the departing roommate will receive their security deposit at the end of the lease term, as agreed to by all parties at the time of move-in, less any unpaid rent and repair costs.
What Happens if One Roommate Refuses to Pay?
Roommates can split the rent as they see fit as long as they pay in full by the due date. Again, this is why adding the clause “joint and severally liable” into the signed lease agreement is so important. After all, it can help protect yourself against non-payment by one of the roommates.
If one roommate refuses to pay their share of the monthly rent amount, it will fall upon the remaining tenant. However, this is only true if you build the “joint and severally liable” provision into the lease agreement. As such, this is a risk the roommates take when entering into a lease agreement together. If everyone agrees to these terms and signs the contract, you can impose this provision on your tenant, regardless of how they feel about the situation.
Breach of Lease Terms by One Roommate
It is not uncommon to have one roommate violate the provisions in your lease agreement during a lease term. And while thorough tenant screening is in place to help prevent this from happening, it can still happen. So, it’s good to know that you, as a property owner, have ways to handle these situations.
You are legally allowed to hold all tenants responsible for the actions of one. Additionally, you can terminate the tenancy of all roommates with appropriate notice if you see fit. For instance, you can legally evict all of your tenants even if only one damages your rental property or violates the lease agreement.
Recommend a Roommate Agreement
A layer of protection you can afford when renting to roommates is recommending they sign a roommate agreement. Though you cannot enforce any agreed-upon terms, a roommate agreement can help your tenants sort out the details of their living arrangements independently.
For instance, a roommate agreement outlines how each tenant will pay rent, who will be responsible for what amount, and how any disagreements or conflicts will be handled. This way, each roommate will fully understand each other’s expectations about living together.
Manage Your Rentals With BMG
Ultimately, the decision to lease your investment property to roommates is a serious one. And, with the increasing popularity of roommates looking to rent homes together continues, this is apt to be something most landlords face at one point or another.
If you are considering allowing roommates to enter into a single lease agreement and rent from you, but want some help managing the property and ensuring everything runs smoothly throughout the lease term, contact Bay Management Group. We have knowledgeable staff on hand to draft legally compliant lease agreements that accommodate roommate situations. Additionally, we have the ability to conduct routine inspections to ensure your property is being well cared for.
In addition, we have the experience to handle evictions, non-payment of rent, and all other property-related issues. Bay Management Group is here to help you with whatever you need to make your roommate rental experience successful.