In certain areas, especially cities or locations with a large student population, the issue of roommates will come up frequently. So, do you have to accept roommates? For landlords, renting to multiple, unrelated tenants can widen your pool of potential renters, ultimately helping to fill units quicker. However, it also comes with its fair share of challenges. Conflicting personalities and varied schedules can become a hassle to deal with. To protect your investment, setting clear expectations at the start is crucial. Below we take a look at what are typical roommate responsibilities along with tips on dealing with multiple tenants in your rental.
Tips for Managing Multiple Unrelated Occupants
- Know the Local Laws
- Make Screening a Priority
- Do Not Divide the Security Deposit
- List Every Tenant on the Lease, Including Replacements
- Require All Tenants to Have Renters Insurance
- Understand the Importance of Being Jointly and Severally Liable
- Avoid Subleasing
- Rent Should Be Paid in One Lump Sum
Local Laws Restricting Occupants
Many local jurisdictions have restrictions on how many unrelated occupants can reside together. Before you accept roommate applications, make sure the situation complies with these laws. In Philadelphia, for example, no more than three unrelated persons can live in a single household unit.
Screen Every Tenant
All tenants on the lease are responsible for the upkeep of the property and rent payments. Therefore, every tenant over the age of 18 needs to thorough application screening as if they were renting individually. You will want to verify income requirements, creditworthiness, criminal background, and rental history. In instances where roommates change, thoroughly screen any incoming tenant as well.
Do Not Divide Security Deposits
When one renter leaves, they may come to you for their “portion” of the deposit. However, when dealing with multiple roommates, the deposit should only be returned when all parties vacate. Remember, the deposit is there to protect you against damages, and thorough inspection cannot happen until the property is vacant.
How Departing Tenants Can Receive Their Deposit
- Co-tenants Working Together: To remedy the deposit situation while still keeping the landlord whole, tenants can choose to work it out themselves. For example, the incoming roommate can reimburse the departing tenants for their share of the security deposit.
- Waiting for Vacancy: The other way to receive their portion of the deposit is to wait it out. Once the property is vacant and inspection complete, the landlord will return all or a part of the deposit. After this, the departed tenant can receive their share.
List Every Tenant on the Lease
Each tenant in the home is held equally responsible for the care of the house, rental payments, utilities, and deposits. So, have each tenant listed in the agreement and sign before moving in. Over time, roommates leave, and new ones come. When this occurs, you need to draft a new lease agreement and have all remaining and the new tenants’ sign. This ensures the agreement stays legally enforceable and gives you a chance to address any other issues that have come up. It may add to your administrative tasks but is well worth the effort to protect yourself.
Require All Tenants to Have Renters Insurance Coverage
Renters insurance should be a requirement for any rental, whether that be for one person or many. In the case of roommates, each tenant should be able to show proof of liability coverage. Nowadays, standard policies include $100,000 in liability protection, which is a good rule of thumb. It is up to the individual tenant how much insurance they want to purchase for their personal property coverage, which typically ranges from $5,000 to $25,000. So, don’t overlook insurance requirements; it is for both your protection and theirs.
The Importance of Understanding Liability
The best way to protect your interests in a roommate situation is to make sure you have a solid lease. This lease needs to state that all tenants are “jointly and severally liable.” While individuals may see it as unfair, joint liability means if one tenant violates conditions, all tenants are also liable. This is standard language in multiple unrelated tenant scenarios and is a great way to protect yourself from potential disputes.
It is in your best interest to make sure that all tenants in the property are on the lease. By doing so, all tenants under the contract are accountable based on those lease terms. Sublessors are individuals that do not sign the lease and are therefore not liable for the obligations in the original lease. Thus, avoid this at all costs.
Rent Payments Should Be One Lump Sum
Just as you would expect from a single-tenant, rent should be paid in full and on time. Multiple tenants may only pay a portion of the rent but insist that what comes to you is one in full payment. This helps to prevent you from becoming entangled in the roommate’s financial matters. So, if someone is short on rent, they will need to work that out amongst themselves.
Tips on Preventing Roommate Disputes
When different personalities live in close quarters, disputes are bound to happen. As a landlord, you do not want this to become your issue. After all, you are not the mediator to your tenant’s squabbles. There are a couple of things you can proactively do to help streamline communication and avoid some troublesome situations.
- Suggest Roommates Create a Co-Tenancy Agreement: A Co-Tenancy agreement outlines some basic house rules, division of responsibility, and procedures that all roommates can agree to. These should also cover how the rent will be collected and placed into a lump sum along with utility splits, cleaning expectations, and miscellaneous obligations.
- Appoint a Tenant Representative: Landlords have an endless array of tasks in a day, chasing down multiple people is time-consuming. To make things easier on everyone, appoint one tenant to act as a point of contact for the household. This will streamline communications and tenant requests about time-sensitive issues such as maintenance.
As you can see, renting to multiple, unrelated tenants can create added concerns as a landlord. So, do you have to accept roommates? Well, if your property is in an area where roommates make up a large portion of potential renters, it is worth considering. Following these simple tips above will ensure a smooth leasing process and added protection for your interests. Feeling overwhelmed as a landlord or need a stress free way to handle your investment? Reach out to a Bay Property Management Group for help will all of your rental and leasing needs!