What to put in lease to protect Landlord for multiple Renters

Question

I got a situation where I have 3 roommates looking to rent my 3 bdrm house.  Obviously, not the most ideal, but it's already the end of the month.  2 of the roommates have a few thousand in the bank, and the 3rd has $10k or so.  Rent is $2800.  Credit is ok, 600s or so.  What kind of language should I put in the lease agreement to protect myself from possible issues.  I have done the following -

- increase security deposit by $1200.

- ask for only 1 rent check at the beginning of the month

- ask for only 1 person to contact me if there are any issues.

- have the guy that makes the least and has the least amount of reserves have his dad co-sign.

Anything else I need to add/consider?

Steve Babiak · Answer

@Eric C. - for you to contact them, pick one or have them select one point of contact - that is a good idea for you when contacting them.  But for them to contact you - i would not limit that.  Imagine something is wrong with the house, and needs immediate attention, but your single point of contact is vacationing halfway around the world so is sleeping there when the roommate is trying to reach them; vs that same roommate getting in touch with you directly and you remedy the problem before it becomes more expensive to fix.

And of course, when that one point of contact is avoiding you ...

Duncan Taylor · Answer

Have language saying they are jointly and severally liable for the full rent amount and all damages.

Bill Gulley · Answer

I've leased to unrelated parties (college kids) over 15 years and have seen a few issues between roommates.

Through that experience I do one lease to a lead tenant who sublets.

The lease agreement specifies that subletting is allowed with owner consent, such not being unreasonably denied but with approval. Rent increases per head.

There is a sublet lease agreement, identical to the lease except that the lead tenant is named rather than me. Assignment provisions are made.

There is an assignment of the sublease agreement from the tenant to the landlord upon any event of default of the lease. The sublease becomes a part of the lease allowing enforcement by the landlord.

Failure to manage any sublet tenant is cause for termination.

In consideration of the landlord allowing subletting, each hold harmless and agree to indemnify landlord for damages, costs or expenses arising from the lease.

Subletting tenants become liable to landlord upon default or termination of the master lease.

Why all this? Because you can't hold subletting tenants jointly responsible unless they are under contract as joint tenants, might as well say the paperboy is responsible or someone off the street if there is no contractual relationship between the landlord and the subletting tenant. If there is, they aren't subletting, they are jointly on the lease.

I didn't want that, because I could enforce any matter through the lead tenant, evict them or through them to any subletting tenant. I could evict one without bringing any suit against the others. If they are jointly or severally responsible under one lease, all must be named to evict, putting the good kids name on court record.

I also found that the lead tenant would graduate and move on, the subletting tenants remain under the subletting contract, making one the lead tenant was by addendum to the lease.

Tenants come at different times, one may start in March, another in July another is September. This stagers tenants, the lead (or a sub) may leave and the remaining are still under contract, they are motivated to fill the vacancy. When they find a replacement the new subletting contract begins at another current staggered date. My vacancy was zip!

The lead tenant was the contact, heck anyone could call with issues and did, but collections and demands were to or through the lead tenant.

What this did basically was making the lead tenant a manager of sorts making my life easier. The lead tenant could also call the maintenance guy.

I've mentioned this arrangement before on BP. My property was financed with "funny money" from the city requiring city approval of the lease, the city attorney was very pleased, not only to the arrangement but to aspects of assessing fines being made a part of rents next due in the event additional administrative requirements were necessary as the rents were based on limited administrative oversight. For example, if I had to replace the trash cart from the curb to it's storage area, that constituted an additional fee. The fee was made a part of rents and if unpaid became unpaid rents with cause for termination of the lease. I never had to replace the trash cart or clean up the yard or clean out the shared laundry area, etc. !

You might consider this approach and see your attorney. If you're going to use the same lease contracts 100 times that $200 attorney fee means that lease costs $2 for each deal, well worth doing things right. :)

Steve Babiak · Answer

So you basically are going to see about $935 per roommate here for rent.  That implies monthly income for any single one of at least 3x that, or basically $2800 (originally divided the monthly rent by three since that is the roommate quantity, and then multiply result by 3 for minimum qualifying income per month). That's an annual income of $33600 minimum.  Now, roommates do have some volatility, where somebody will want to move out for a variety of reasons; that could leave just 2 of them there then - so I would be more comfortable if each earned 1.5 times the minimum I just gave, or $50400 per occupant per year.  If they have that, you should be OK in the event one breaks off from the other two - and that level of income wouldn't indicate a co-signer or guarantor is needed (other reasons might exist).

600 credit seems good to me - I get to see much worse :)

@Duncan Taylor has given you the language you should have in your lease for ALL tenants, not just roommates.  That is just standard IMO.

I don't and wouldn't limit the point of contact to a single person; if you had a married couple you wouldn't say that you will only speak with the wife or only speak with the husband.

My roommates only drew complaints from neighbors due to parking, so you might want to consider the parking situation somehow.  Three guys that I had once whould have 3 girlfriends visiting at the same time and spending the weekend = 6 cars parked with driveway that only holds 2 cars.  Street parking is free for everybody, but the neighbors weren't happy ...

Colleen F. · Answer

We email and copy all. It isn't that much harder and it saves you from surprises.  You are coming to do a repair on something and it is in use when you get there.  No one is going to be home so the guy says come on and you knock and no one answers because his roommate is fast asleep in my experience it is more likely roommates forget to tell each other then couples. Sometimes they don't hang out with each other much.  There are plusses to this situation. You have 3 salaries coming in, you have 3 adults taking care of the place.

Go over the subletting point on signing too just to be sure they have read it. Make sure parking is specified too.

Eric C. · Answer

Good point.  I was only thinking about when I contact them.  Thanks for the clarification.

Tim Soto · Answer

You may also want to put some language in your lease to prevent the residents form subleasing to others. Whenever I rent to multiple primary tenants, as in this case, I am adamant in collecting each individual's rent through direct deposit to prevent issues that could and do arise.

Eric C. · Answer

I left out this point because it is already implied when all 3 are on one lease agreement (at least in CA).  I might add additional verbiage just to make sure they understand though.

What to put in lease to protect Landlord for multiple Renters

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