Leasing To Multiple Tenants

A house for rent sign in the middle of a grassy lawn with stepping stones and a fence in the background

It's recently become popular for landlords to rent out single family homes to multiple tenants, particularly in college towns or places where there is a high cost of living. It's a win-win situation: landlords get a significantly higher income than they would with just a single renter and tenants save money, too. But with the addition of each tenant, the likelihood of issues increases, too. From noise complaints to property damage, the problems each renter adds can create stress, as well. If you need help setting up a rental agreement, lease contracts, or any other landlord/tenant issue, the experienced, dedicated attorneys in our network of member law firms across the country can help you with no additional fee to members of our Legal Subscription Plans. The add-on benefits from our Home-Based Business Owner's coverage and our Real Estate, Renters, & Landlord Coverage add-on can give you access to legal advice any time. In the meantime, here are a few tips for renting to multiple tenants.

Roommate Agreement

Strongly encouraging tenants to sign on to a roommate agreement can eliminate disagreements before they even start. A roommate agreement should detail rules, responsibilities, and guidelines for the shared home, including guests, utilities and bill sharing, noise, deposits, pets, parking, room allocation, common household items, food, cleaning, landscaping, and more. Roommate agreements aren't legally binding, but as the landlord, you can help enforce it.

The Actions Of One Affects Everyone

Each tenant should be made aware before moving in that the actions of one tenant could affect all the renters, as landlords can cancel lease agreements for all tenants if one tenant violates clause in the lease. This is not intended to create a hostile atmosphere with your tenants, but should be used to drive home the idea that the tenants should work together to uphold the terms of the lease.

Lease Language

A joint and several liability clause in your lease is very important. This means that each person who signs the lease is responsible for rent, and if one tenant can't pay, the other tenants will not be allowed to pay on their behalf. How the rental amount is divided is up to the tenants.

Subletting

Prohibiting subletting and AirBnBs is very important in today's fast paced world where people's lives change very quickly and often without warning. People move in with significant others or must leave town for work and they often want to solve the problem of owing rent in two places by subletting. Unfortunately, the sublettors will not be on your lease agreement, are not legally liable for the rent or property damage, and are not subject to any other terms of your lease. Plus, it can take months to evict sublettors in certain states where they may have squatters' rights.

Security Deposits

Dividing the return of a security deposit is bad idea as it can get messy quickly. If you have some renters that want to move out at the end of a lease but some that want to renew the lease, returning the security deposit can be a nightmare if it is not explicitly stated that the security deposit is refunded when all parties to the original lease move out. The same advice goes for property damage, as it can be a disaster to decide how the money should be divided. Waiting until all parties to the original lease move out to return deposits will save you headaches in the long run and, when all the parties have vacated the premises, you can leave it to the tenants to decide how the security deposit refund is divided.

Tenant Screening

If a tenant moves away, the other tenants typically try to find someone to replace that tenant right away, but no matter who it is coming in to rent your property, make sure to do a thorough background and financial check.

Renters' Insurance

While you can't require tenants to procure renters' insurance, you can certainly recommend that they get some, for their own peace of mind. Personal property can go missing or be damaged just as easily as the property itself.

Representatives

Getting your tenants to appoint a representative from among the group can alleviate miscommunication and create a consistent point-of-contact.

Make Sure Your Lawyer Reviews the Lease Agreement

The lease agreement is a complex legal document that only gets more complex as more tenants are added. Having your attorney look over your lease agreement - or, better yet, helping you draft it - can protect you, your property, and your rights before the first tenant signs on the dotted line.

Get on-demand help with your rental business from day one when you become a member of our Legal Subscription Plans with our Real Estate, Renters, & Landlord Coverage add-on and rest easy knowing that your legal bases are covered, no matter what happens. Learn more about our Legal Protection Subscription Plans for Individuals & Families, our Home-Based Business Coverage, and our Real Estate, Renters, & Landlord Coverage add-on or sign up today!

Landlords Are Small Business Owners - What You Need to Know

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Whether your rental is your main occupation or something you do on the side, being a landlord means that you are a small business owner. Just like any other business, landlords need to have their business affairs organized and take a professional approach to all aspects of running their business to avoid costly mistakes. Most guides focus on the basics of the business of being a landlord, such as collecting rent and making repairs, but there are additional, business-related aspects that shouldn't be ignored.

Just like any business, it's a landlord's responsibility to get proper business licenses, file and pay taxes, and have proper insurance, but there are a few other areas landlords might want to review.

CONTRACTS

The day-to-day paperwork of being a landlord - accounting, taxes, and marketing, for example - are common small business aspects, but one of the most important things you'll need as a landlord are contracts. These are vital documents for any landlord-tenant relationship, as well as for contracted repairs or maintenance. Not only having these contracts, but insisting upon them with everyone you do business with, protects you and your investment. Don't hire a property manager or a contractor with just a verbal agreement and a handshake, no matter how well you know them, and certainly don't rent to anyone without a written, signed contract. Contracts protect all parties involved, and especially when you're running a small business, you can't afford to take risks. Don't just download generic forms from the Internet; get the advice of a qualified attorney with experience in landlord law and legal issues. (It's easier and less expensive than you might think.)

ANNUAL INSPECTIONS

Yearly inspections are a necessity to ensure that your properties are habitable and all major systems and structures are well maintained and not damaged, either by age or by tenants. Inspections allow both the landlord and the tenant to know the condition of the property and be aware of any issues: tenants can highlight any needed repairs or maintenance, and landlords can make sure that the property is being properly cared for and kept up and that there are no lease violations. These regular inspections avoid any surprises when a lease ends, as well, making it easier and less expensive to repair issues that come up. Inspections should be by-the-book: give tenants proper notice beforehand and avoid invading their privacy more than needed. Document the walk-through with the tenants.

PROPERTY MANAGEMENT

Sometimes, you may need outside assistance to manage your business, especially if you have more than one property or rental unit, so, when you're considering hiring someone to manage your properties or other aspects of your small business, that may make you an employer, which means additional payroll, employment, and tax considerations. One way to avoid this is by using a rental management company. As independent contracting companies, these management companies don't come with administrative work or additional taxes. However, these companies and their services can be expensive, and may be of a greater benefit to you if you own multiple units or multiple properties.

CONTRACTORS AND REPAIRPERSONS

There are always going to be some repair or maintenance work that a landlord needs to have done by qualified experts, and hiring professionals to do work around your properties means that you should have a service contract with any contractors you hire. Make sure that the contract details the specific work to be done, a date for completion, an agreed-upon price, and what happens if the work isn't done on time, or if there are more extensive repairs needed once the work has commenced. Make sure that there is a clause for dispute resolution, a provision that should always be included in any business contract.

CONFLICT RESOLUTION

No matter who the other party is - a tenant, a contractor, or someone else you've contracted with - disputes happen and are always a possibility. Before signing a contract, make sure you understand the terms of fulfillment for all parties involved, and double check the provision in your contract for dispute resolution. Communicating with all the parties involved in a contract to solve problems before they require legal intervention is important and can save you money and time. Some ways to handle disputes include mediation, negotiation, and arbitration. Each of these tactics has their own pros and cons, but ensure that your contracts specify what is to be done in the event of a dispute and that all parties are aware of the resolution strategy.

Don't leave your property rental business to chance, especially when it comes to something as easily controlled as contracts. Small disagreements between landlords and tenants can become large disputes and legal nightmares in a hurry. The Home Business Supplement add-on to your legal subscription plan costs just an additional $12.95 per month, and gives you unlimited attorney support regarding your rental properties and problems with tenants.

Every part of landlord law is covered with the Home Business Supplement. Get legal advice and support in any area of law related to your rental properties or your real estate business as a whole. Our legal subscription plan members get to work with experienced, dedicated, real estate attorneys with extensive backgrounds in landlord/tenant law, and can review all contracts you might need in your small business. Learn more here, or sign up now!