One of 3 tenants lost job - options?

[Ryan King]

I'm renting out the other side of my duplex and there are 3 people on the lease. One of them just called and said he can't afford rent due to job loss and will be moving out. He said he's looking for a sub-lease already. What are my options (I'm a total noob!)? I'm guessing I should tell him (and the other 2) that I'm still expecting full rent so either they can figure out between the 3 of them how to pay it from now on or allow him to find a sub-leaser who will sign a lease with me and pay his portion of the rent each month. Right?

Or should I make it easier and just accept 2/3 rent and not risk getting into a weird situation with a random 3rd person causing issues with the other 2?

Thanks for any help!

[Jim Shepard]

This is a business, treat it as such. Will your banker accept a 2/3rds payment? Do not let them only pay you 2/3rds. YOU need to put any replacement they find thru your normal screening and approval process.

[JD Martin]

That is the concern of the other two roommates, unless you allow each to responsible for only one third of the rent. Otherwise, they need to find a replacement and have you screen as any other tenant. Or they can pay 50% each.

[Nicole A.]

Read over your lease. It possibly/probably states that it is "joint and several liability in the case of multiple Tenants."
This means that everyone is responsible no matter what. You don't care how they divide up the rent. That is their business.

Also, what does your lease say about subletting?? Does it allow it? And you need to have the final say in who this person replacing the one tenant is. If your lease allows it, I would suggest you change your template for future usage to say it is NOT allowed.

Basically, this is their problem. Don't let them try to make it your problem. If they are late, you file for whatever the first step of eviction is quickly. Don't give them "another week to pay." You'll waste time. File, and if they pay, you can cancel the eviction.

If one person moves out, same deal. It doesn't matter. Physically there or not, they're on the lease.

[Ryan King]

Unfortunately the lease was in place when I bought it. It does say they need my permission to allow a sublessor so they can't just do that. I don't see anything about the joint and several clause but all three signatures are on it and it clearly states the amount due. I guess I'd rather work with them than worry about an eviction process and trashing the place because they're upset.

[JD Martin]

How much time is left on the lease? If it is almost done, maybe you let them all walk and start fresh.

[Ryan King]

There's 6 months left. I thought about that. I can more than afford the mortgage now and I could do some repairs/improvements and raise rent. Not sure I want to undertake all that plus finding new tenants though.

[Nicole A.]

@Ryan King I have filed evictions on several tenants, and none have trashed the place because they were angry at me for it. I am friendly and fair to them, but I stick by the lease. I even had one guy who was kinda a con-artist and decide to get angry at me...but he still didn't damage the place.

Do not let your tenants run the show. You're going to lose a lot of money. And it'll be a lot more work on your end. They'll fall further and further behind because you allowed it. Then you'll get fed up and file for eviction....then they'll be surprised and mad because for months you allowed this.

Set the expectations now. In the beginning. File for whatever the first step is for eviction as soon as they're late.

You will be surprised how often people magically find the money when they see you're serious.

[Mike Cumbie]

Hi @Ryan,

I wish you the best of luck. 

In my opinion if you take 2/3rds rent you will be taking it for the next 3 months, then you will end up taking 1/3rd rent. That person is going to love the place and want to be there forever. How long can you be running a profit at 2/3rds or 1/3rd rent? At what point are you going to upset one of them? How fair is it to let this guy out of the lease and then not let the other ones out because they want to leave (They will ask you that question when one wants to move in with a girlfriend)

Good luck!

[Ryan King]

I agree and I won't be pushed around. BUT I don't have a problem with lowering rent for the other 2 for 6 months if it means avoiding all that. I think... haha

[Mike Cumbie]

@Ryan King,

Got another place I can rent? You allow subleasing right?

:)

[Ryan King]

@Mike Cumbie nope just the one! :) and NO subleasing

[Nicole A.]

@Ryan King In the end, it's of course your choice, but if you allow accepting 2/3 the rent, you ARE being pushed around. Instead of sticking to your lease, you're willing to lose money to make them happy.

Eviction processes are rarely that difficult. You need to be willing to do these things if you're going to be a landlord.

The rent is typically based on the property. It's not based on the number of people.

[Ryan King]

@Nicole A. I'm surprised you're saying they aren't difficult. I've heard horror stories so to me that's an absolute last resort. I respect your opinion though and obviously you're more experienced. I just informed the other 2 about it and basically just said I can't just take his portion off rent and that there is still a lease. We'll see what they say back.

[Mike Cumbie]

 @Ryan King

My first time as a landlord it was an old farm house with an in-law and I lived in the big part. I inherited a tenant. A school teacher that was great. Paid the rent before the first for the first four months. Never heard a peep out of her. One day on the second of the month she said 

"Hey Mike, I have a problem with the rent, I can have it to you on the 6th, I'll pay the late fee"

My response: "No that is OK, you have been great don't worry about it"

I'll give you one guess who was looking out their window waiting for her car to pull in on the 12th of the next month. 

"Oh yeah I forgot sorry, can I drop it off tomorrow after work, I am really tired"

."..sure.."

I got the rent the 17th that month and it stayed that way until it all ended and never got a late fee once.

I did not have a bad tenant, I broke a perfectly good tenant by my actions thinking I was nice. I guarantee her car payment was on time and her credit cards as well as utilities were all on time. It is your choice of course.

[Nicole A.]

@Ryan King Don't go off of horror stories. If you went off of horror stories, why'd you buy a rental property?

Maryland is known as "tenant friendly," but the process is very simple. I doubt it's bad in Iowa. In fact, I did a quick search on your state.

This site tells you exactly what your first step is....you send a 3 Day Notice to Cure. You probably should send it multiple ways such as certified mail, post on the door (take a picture), and regular mail. After 3 days and they still don't pay, you file for eviction in court. There will probably be a court date similar to traffic court where a bunch of people are pushed through like cattle. It's not like you're in there alone having a huge case. It's not that big a deal.

http://www.iowalegalaid.org/resource/eviction-for-...

Read up on your stuff. Have some interest in your investment or lose money and give away discounted housing. Then you'll be the next person to tell "horror stories" when in reality, you could have fixed it easily.

[Ryan King]

So basically you guys are saying if I even move an inch in rent, they'll want a mile and if they can't figure it out, its better to evict and start over than getting taken for 6 months?

[Nicole A.]

Same site, just back one page to show all the other info:

http://www.iowalegalaid.org/issues/housing/landlor...

[Nicole A.]

Yes. Like I said, you'd be surprised how many times they find all the money they said they didn't have once they receive an eviction notice.

[Mike Cumbie]

Sadly yes,

[Account Closed]

Protect your investment first, negotiate a new lease & new rate if it suits your situation with the two remaining with the exact terms you want OR
insist they collectively remain liable for the remainder per the lease unless they provide a suitable replacement acceptable to you. The remaining two can seek damages from the one leaving. It's their problem, don't make it yours. Start the eviction process in the meantime & explain to them it's not punishment, it's asset protection & business.

[Tom Ott]

Originally posted by @Ryan King:

I'm renting out the other side of my duplex and there are 3 people on the lease. One of them just called and said he can't afford rent due to job loss and will be moving out. He said he's looking for a sub-lease already. What are my options (I'm a total noob!)? I'm guessing I should tell him (and the other 2) that I'm still expecting full rent so either they can figure out between the 3 of them how to pay it from now on or allow him to find a sub-leaser who will sign a lease with me and pay his portion of the rent each month. Right?

Or should I make it easier and just accept 2/3 rent and not risk getting into a weird situation with a random 3rd person causing issues with the other 2?

Thanks for any help!

 Hi Ryan,

This is a difficult situation! Unless all 3 of the tenants know a person to sublet, I would not recommend that. The other 2 still live there and they might not want to live with a stranger.

Even if they all do find you someone, make sure you do the same background check you did with the first 3. Don't just take a new person because you really want to fill it up.

Lastly, I recommend you start off by reminding all 3 of them that the signed a lease and they all must adhere to it. It is still a binding contract and rent must be paid on time. Even if it is left up to the other two to come up with the rent, it is still due. The other two are just as responsible as the first for getting the rent to you. It doesn't matter who didn't pay, the problem is that rent was not paid in full.

Please let me know if you have any questions!

[Ryan King]

@Tom Ott thanks!

This is exactly what I've told them. They had friends interested but then they backed out. They're now trying to figure out how they can pay rent and stay. Funny how they work at figuring out a solution when you hold them to the contract and not let them off easy, huh? I did offer them to terminate the contract early if they're not going to be able to pay but hopefully we don't have to do that. Appreciate the advice...

[Tom Ott]

Originally posted by @Ryan King:

@Tom Ott thanks!

This is exactly what I've told them. They had friends interested but then they backed out. They're now trying to figure out how they can pay rent and stay. Funny how they work at figuring out a solution when you hold them to the contract and not let them off easy, huh? I did offer them to terminate the contract early if they're not going to be able to pay but hopefully we don't have to do that. Appreciate the advice...

I'm happy to help, Ryan. I know these types of situations can be rough. We see A LOT of them with my company. Sometimes you just have to deal with case-by-case and see what happens. In the end the lease is what matters. It is binding and sometimes tenants forget that. It is our job to remind them of it!

Best of luck to you in the REI world!

[Jeff Gates]

I am guessing you are now one half a month without a rent payment in full. Are you being the nice guy? Landlords fail when they don't follow their own rules.

[Ryan King]

@Jeff Gates Nope, not at all. They paid all of January. I guess I didn't make that clear but the tenant was talking about starting in February and told me after Jan rent was paid. Last I heard he was interviewing for jobs and wanted to make it work. So all is well for now. We'll see once Feb 1st hits I guess...