Rental notes: How to avoid rental defaults when tenants split
Category Rental Advice
It’s quite common for landlords to rent apartments and houses to multiple tenants, but they need to make sure they’re covered them in the event of one or more of these tenants moving out before the lease expires.
“We see this all the time,” says Greg Harris, CEO of Chas Everitt Property Rentals, “with students dropping out before the end of the academic year and moving out of their shared accommodation, for example, or young people who decide to go travelling or to relocate for work and leave their former flatmates or housemates behind.
“We have also encountered instances of properties being rented by engaged or even married couples who each pay half the rent until something happens and one partner decides to move out.
“And such situations can pose quite a problem for landlords unless their leases are correctly worded to state that the tenants in a multiple-tenant situation are ‘jointly and severally’ responsible for the full amount of the rent.”
This wording means, he says, that each tenant in a shared flat or house is legally responsible for making sure that the entire monthly rental is paid, so that if one moves out without warning – or perhaps does a “midnight run” because they are unable to pay their share of the rent – whoever is left will have to make up the difference for the duration of the lease or until the missing tenant is replaced.
“To be fair, the lease in such cases should also provide that the landlord will make every effort to replace the missing tenant as soon as possible, and this is of course much easier if the property is already managed by a reputable letting agency such as Chas Everitt Property Rentals which can not only advertise for new tenants but conduct proper credit and employment checks before allowing them to take occupation.
“This protects the remaining tenants as much as the landlord, and on top of that we are experienced in dealing with departing tenants who wish to claim a share of the original damages deposit.”
Harris says there is an alternative option for landlords, which is to make one tenant in a multiple-tenant situation the “primary” who is solely responsible for paying the total amount of the rent each month, but is allowed to sublet certain portions of the property – such as the rooms in a commune – and collect rent from the sub-tenants to subsidise his or her own payment.
“In some ways, this is more convenient for landlords as it means there is only one amount to collect each month and one tenant to evict, legally, if the rent is not paid, and we have often seen it done in the case of student accommodation, where the parents of one student will sign the lease for a shared house or flat and assume responsibility for paying the rent.
“However, we do not advise it, as there are also considerable risks with such arrangements, including the fact that the landlord may not necessarily have control over who moves in or out, and that this can open the door to overcrowding and unacceptable tenant behaviour.”
In addition, he notes, it can prove difficult to physically evict sub-tenants even if you do get a court order to evict a primary tenant who is in default, and develop into a really unpleasant situation if the sub-tenants have in fact been paying every month and the defaulter has absconded with their money rather than pay your rent.
“On the other hand, there are also risks for primary tenants in such instances of being left with the whole bill when sub-tenants leave suddenly or without paying, of not having professional help to find reliable replacements, and of being penalised for damages caused by the sub-tenants when the lease expires and they would like to claim their deposit back.”
Nevertheless, some landlords do prefer this set-up and once again, Harris says, the keys to avoiding problems are an experienced and diligent managing agent such as Chas Everitt Property Rentals, and a correctly worded lease, which in this case should provide that all sub-tenants must be vetted by the managing agent in the same way as the primary tenant, and can only move in subject to the landlord’s approval.
“It should also provide that the landlord or managing agent is to be advised immediately if one or more sub-tenants moves out, as an early warning of possible payment difficulties.”
Author: Meg Wilson