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Landlords Guide to Co-Tenancy Arrangements

Two roommates sip coffee during their moving day as they launch a co-tenancy relationship.

Landlords frequently face situations where they rent out their properties to two or more unrelated individuals. Accepting co-tenancy arrangements widens the available pool of applicants because you can rely on pairs or groups of people with multiple incomes to rent your property. It’s often a better option than waiting to find a single person or a family who can afford the whole place on their own.

Co-tenancy, in residential real estate, typically refers to situations where two or more unrelated people rent a property together. Two friends renting an apartment, for instance, is an example of co-tenancy. A group of four strangers who attend the same college or even an unmarried couple can similarly be considered a co-tenancy.

This term, in relation to commercial real estate, refers to situations where the presence or lack of presence of an anchor tenant affects the rental terms of another tenant in a multiunit facility such as a shopping mall or strip mall.

Co-tenancies, however, come with potential risks, such as roommates not getting along and wanting to break the lease early. You can reduce the risk of unexpected vacancies, protect your property, and avoid renting to people who are likely to break the lease, though, if you handle these situations carefully. This guide provides tips and strategies to help you manage co-tenancy relationships as effectively as possible.

Setting Up Co-Tenancy Arrangements

four co-tenants doing a cheers at the dinner table

Roommates, ideally, create a respectful living environment where everyone chips in to take care of the property and always pays their portion of the bills on time. The reality, however, rarely reflects this scenario. You should follow these tips when considering if you want to rent to co-tenants.

Include Co-Tenancy Rules in the Lease

Landlords who use a standard lease for all their rentals should have co-tenancy terms spelled out in their lease, or they should draft new leases with co-tenancy terms as needed. The lease should state that co-tenants are jointly or severally liable for the lease’s term.

All of the roommates are liable, for example, if one person doesn’t pay their rent or breaks the lease by moving out early. All tenants are also liable for damage, regardless of who caused it. Joint liability refers to shared liability between two people, while severally liable refers to liability between multiple people.

Screen All Tenants Carefully

Do not allow anyone to live in your rental properties unless you have thoroughly screened them. Your rental properties are likely to be one of the most valuable assets you have, and you shouldn’t trust them to anyone without an in-depth understanding of their criminal and financial background.

Put All Roommates’ Names on the Lease

Make sure that all the roommates’ names appear on the lease if you decide to move forward with a co-tenancy arrangement. Some landlords are willing to put a single person’s name on the lease and then let that person choose their roommates.

This puts you at risk because if the only person named on the lease cannot afford the rent on their own, you may lose money if their roommates fail to pay the rent. You additionally have no control over the roommates they choose, and they may not be people you want in your property.

Consider encouraging renters to create roommate agreements if they are living in a co-tenancy. These agreements outline how the roommates split the rent, who writes the check, how they share bills, and other logistics of living together – they can even include schedules for sharing chores. These contracts don’t change anything for the landlord, but they can help improve the success of the living arrangements between co-tenants.

How to Manage Co-Tenancy Rentals

Deciding to rent to co-tenants and having them sign the lease is just one of the first steps in your relationship. You also need strategies that help you successfully manage co-tenancies. Check out these tips.

Do Not Split Security Deposits

You shouldn’t have to chase multiple people looking for a check. You should save yourself time and energy by having the roommates write a single check for the security deposit. They should decide between themselves who pays for which portion of the deposit, and they should bring you the payment in a single lump sum.

Co-tenants who cannot handle paying the deposit together will likely not be able to successfully take care of a rental or stay on top of the rent payments either. Problems paying the deposit is a big red flag, and you may want to move in another direction if you sense issues this early in the process.

Only Collect One Rent Check

You should also, in that same vein, only collect one rent check. A single rent check makes banking, bookkeeping, and tax prep easier for you, and it also ensures that you don’t end up dealing with situations where one roommate’s check bounces while the others’ checks clear.

Require Renter’s Insurance

You should require renter’s insurance, whether you’re renting to a single person, a family, or multiple co-tenants, but it’s arguably even more important when you’re dealing with roommates. You should also ensure that you have property insurance that covers you in the case of damage caused by negligent tenants.

You need to ensure that you’re in charge when dealing with co-tenancy relationships. You should screen and approve all people living in your properties, and that means you should also avoid allowing tenants to sublease the property to other roommates or people you don’t know.

Contact Rent Safe for Help With Co-Tenancy Arrangements

Rent Safe allows you to quickly screen prospective tenants and their roommates, but it also facilitates electronic rental applications that easily enable applicants to add roommates, co-tenants, co-signors, and more.

Don’t trust one of your most valuable assets to just anyone — instead, use Rent Safe to help you learn as much as possible about prospective tenants so you can make effective decisions about who you rent to. Contact us at Rent Safe today to learn more.

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