Unauthorized tenant - add to lease with increased rent?

Question

Hi everyone,

First off, very grateful for everything I can learn from BP and to everyone for the contributions.

My question this time. I have just done my first scheduled maintenance visit to my first rental (great tip from BP-ers).  Found quite a few things: leak in kitchen sink (my contractor is going to repair that for us based on his 1-year labor warranty); smoking in attached garage (going to ask tenant to stop doing that due to "non-smoking" clause in lease).  Most alarming is clear sign of unauthorized occupant.

The tenant is a single mom with her 3 young kids. Everytime my husband and I come to visit the house for some initial repairs since the beginning of the lease, we have always met with her cousin who claims to live nearby, has no car, and is there to help his cousin (the Tenant) with the moving.  Now 4 months passed and we came to maintenance-check the house and we saw him, his gf, and his 1 y.o. son in one of the rooms in our 4br house.  I am sure they live there, not staying over, because I saw his clothing & shoes in the closet in the room, with a few boxes of size 4 diapers that can only be for his son but not the tenant's youngest daughter who is going to be 3 yo soon. My son is 2 so I'm pretty sure about the sizing.

My PM suggests to give them 2 options:

1) move out - I am not sure we can enforce that.

2) add the cousin to the lease, after proper background check, with increased rent to $1550. Current rent is $1350/mo, which is a little high in the area.

I personally think $1450 will be more practical. An increase of $100 a month is easier to be accepted. $200 might be too high (I doubt that he - the cousin - has any job at all), and they may go with option 1, and just try to hide better whenever we visit.

I want to add that I do not want to risk loosing this tenant. Apart from the cousin living there, we are happy with the tenant paying the rent on time, keep reasonably good care of the house, being reasonable in all of our dealing thus far. We have also already signed an addendum for second year lease with discounted rent providing the first year lease is in good standing, hence saving me vacancy and placement fee with PM.

Please advise if should go with $1450 as new rent to ensure they stay, or $1550 as reasonable rent for 2 families living in one house. Is there any other aspects I should look into if adding the cousin to the lease?

Much appreciate all responses.

Anh Dang

Nicole A. · Answer

I don't know...I feel like you're supposed to rent a place based on market rent, not based on number of people in the unit.

Maybe some will disagree with me, but if everything is going well like you say, then why even worry so much about this person? Perhaps bring it up. But I do not personally agree with raising the rent just for an extra person.

These people are paying rent and taking decent care of the place. That's a good thing to have!

Account Closed · Answer

I had tenants who moved their BF or GF into the unit, and I didn't want the second person on the contract, in case they broke up.  I didn't want to end up with the roommate situation where they're both on the lease, then one wants to leave and the other one doesn't want to, etc.

So, what I did, was I kept the original tenant only on the lease.  I did not raise the rent.  And I gave written permission for a long-term guest, naming the guest, with language that said that I can revoke the permission at any time, and this does not create a tenancy or contract with me.  I did not do any credit checks or paperwork, because I feared they'd just lie about how often they were there.

They were really happy with this arrangement, and then nobody has to lie about if they're living there or not.  They feel they can be honest, and the original tenant retains the right to kick the other one out if it's not working.

I also told them I don't care what their financial arrangement is - but the original tenant remains responsible to pay me the rent every month.

And the BF or GF felt comfortable if they saw me, and weren't afraid to call me with maintenance issues, etc.

Yes, you could end up actually creating a tenancy this way, with the unapproved tenants - depending on the laws where you are, but this worked beautifully for me and my tenants.

Vivian D. · Answer

Thanks everyone for your much appreciated replies.  I learned lots of really useful things, for now and later.

I decided not to raise rent as many suggested, not add to lease (I want the original tenant to be solely responsible for the lease), but add an addendum with the cousin as long-term guests and the tenant to be responsible for everything.  However, the tenant wrote a long email explaining the cousin is just there as nanny to her young daughter and his family is just there for a visit.  I do believe her though.  After all, there is no need for her to lie in this case (no rent increase, no penalty). Will, however, keep an eye to see if anything come up.

Overall, I am very glad I did as BP suggests and have the scheduled maintenance visit done every few months.

Thanks everyone and happy landlording!

Anh

Lynn McGeein · Answer

Not really sure, but I would research fair housing laws and your local rules before raising the rent to allow more people, especially if children are part of it.  At least in one of my cities, it's based on square feet per bedroom for number of children allowed and you cannot discriminate for relationship, so I'd be able to evict for them violating the lease if I could prove they are there longer than my guest terms, but if I then gave permission for the other family, I'd be in violation if I raised the rent by any amount.

Adam Hershman · Answer

I agree with @Nicole W.

@Anh D. We know your happy with the tenant you have on the lease, and we know that your happy with the amount of rent your getting for the house, the only reason to raise the rent due to additional occupants would be increased utilities or if you were concerned that the additional occupants were engaged in illegal activity, or were destructive of the property etc, basically additional risk. There is always greed, which is great in moderation, but again if you are happy with the tenant and the rent and you don't see any additional risk to your assets, whats the harm in having additional occupants. That being said you will want to explore that what risks additional occupants pose, so a background check on the additional occupants might be prudent.

I would think the best way to handle the subject would be to call your tenant and explain your situation to them. Let them know there are many reasons you need to know who is occupying your rental property, not for determining rent. Let her know that you aren't angry or upset with her, and as long as she's honest about the situation she won't face losing the opportunity to live in your rental property. Also let her know that you may have to ask the additional occupants to vacate, or be added to the lease, but that you want to work on a solution with her, not just a punishment for having additional tenants. If you approach it from the perspective of trying to accommodate her needs if you can, I am sure it will be easier to get a rent increase if you need to, and she would be more likely to stay long term.

Just my 2 cents

Adam

Marcia Maynard · Answer

Did you have anything in your lease agreement that prohibits what they are doing? If so, you need to address that issue first.

-----

Our rental agreement states:

"OCCUPANCY.  Tenant agrees that the premises are to
be used and occupied by Tenant and members of Tenant’s immediate family only as
specified in this rental agreement, namely: _________________________________________________. Other persons may not move into the premises, even
temporarily, without Landlord's prior written consent.  If Tenant allows a person to occupy the
residence without Landlord’s consent, Tenant agrees to pay a penalty fee of
fifty dollars ($50) per violation, per person."

"GUESTS. 
Landlord will allow Tenant to host guests on the premises and Tenant
agrees to accept responsibility to ensure guests do not violate any of the
terms of the rental agreement. Tenant agrees to obtain prior written consent
from Landlord for any guest staying more than fourteen (14) days in any 12
month period.  Landlord may at any
time ask guests to leave the premises for violation of any of the terms of the
rental agreement.  If a guest stays
for more than 30 days, Landlord will require guest to either leave immediately
or, upon approval of Tenant and Landlord, enter into a written agreement for
further occupancy or tenancy.  If a
guest refuses to leave after being asked to do so, Landlord may give legal
notice to terminate the tenancy, resulting in the removal of both Tenant and
guest."

-----

@Anh D.If your rental agreement did not give clear direction for this type of situation, then you need make sure you do so next time. Prevention is always better that cleaning up the problem afterwards.

You are still under the typical occupancy limit (4 bedrooms x 2 people per = 8 people). If the house has sufficient bathrooms to accommodate the larger group, fine. It sounds you want the tenant's cousin and family to be able to stay. In that case, talk with your current tenant and see if she too wants this.

If so, require the adults who are not on the lease to complete applications and background checks. Charge them your usual application fee. If they meet your minimum criteria to rent, change the lease agreement with the signatures of all parties involved to reflect the new household make up. I would charge an administration fee to do so.

Then go over the lease agreement with all parties and make sure the adults are listed as jointly and severally liable. Describe your property rules clearly and also have them in writing. Keep in mind, you already know your tenant is a rule breaker, so you will need to be extra diligent in doing periodic property inspections and enforcing the terms of your rental agreement. Good luck.

Tyson Luthy · Answer

A lot of this will depend on how your lease is worded. We build a lot of fees into our lease for violations - not so that we can make more money, but so that we can have more control over the tenant.

Regarding the smoking in the garage: I would take pictures of the cigarette butts or ashtrays, etc. and add a $35 lease violation charge to the tenants ledger asap.

Unauthorized tenants can be difficult to prove. Whenever we do inspections we document how many beds are in the home, and any other signs that there are more tenants in the home than are allowed on the lease.

Once you have documentation, I would charge the tenant for another lease violation.

If the tenant insists on the person staying, have them fill out an application (applicants should be paying for this as credit reports and your time to run apps aren't free). If they screen out well, then there shouldn't be any problems with them staying in the home. If you find any red flags, then hold to your lease.

Joshua D. · Answer

I would for sure do the background check at MINIMUM.  Getting references and previous rental history is what I would do as well. I want to know who in the heak is living in my house!  A convicted felon? Someone who has destroyed other properties? Not in my house!

I would not raise the rent.  Unless you lease stipulates that you have too.  if it is at market and they are good renters then leave it alone.

Just my thought.

Unauthorized tenant - add to lease with increased rent?

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