A Sharing Solution: The Group Rental House
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Sharing a group rental can be an attractive option for single adults, single parents, students, and anyone trying to economize on space and living costs. The monthly rent in a group house is usually just a fraction of what you'd pay for your own apartment. And, you can economize further—and build community—by sharing chores, meals, outdoor space, household items, social events, and more.
Agreements Among the Tenants and With the Landlord
A group that will share a rental should have two written agreements:
- an agreement among the renters (for example, a cotenant agreement or housemate agreement) and
- an agreement between the renters and the landlord (the lease or rental agreement).
A renters' group will likely want to control how it runs the house, so it might want to negotiate for certain responsibilities that would otherwise be retained by the landlord to be delegated to the group. For example, the group may want to be responsible for recruiting new housemates, collecting security deposits, and making certain improvements on the property (such as landscaping).
If the landlord is willing to allow one tenant to be the "master tenant," who has the right to sublease to others, your group can retain more control; however, the master tenant will be solely responsible for paying rent and meeting the other lease obligations.
Signing a group lease makes all tenants "jointly and severally liable" for rent and other lease provisions. If one person can't pay rent or leaves, the others are responsible for making up the lost rent money. This is why it's so important to have a clear written agreement among the tenants about how the house will operate.
The tenants should agree among themselves, in writing, about the following:
- who will use what parts of the house
- how to divide chores and responsibilities
- how to make group decisions
- when and how to meet to discuss household concerns
- how much rent each person will pay
- how to divide expenses such as utilities
- procedures for collecting rent and expense money and paying bills
- what happens if a tenant can't pay
- when a tenant can be asked to leave and what process the group will use in this situation
- how much notice a tenant should give before moving out
- whether departing tenants are responsible for finding a replacement
- whether to carry renters insurance
- policies about overnight guests, pets, and so on, and
- how to bring in new housemates (for example, will the group use an application; try to maintain some balance of gender, age, or race; or give preference to friends or family members).
Rental Agreement With the Landlord
The landlord will probably present your renters' group with a standard lease or rental agreement that includes at least the following terms:
- the total rent for the property, as well as how and when the rent must be paid (and any late fee the landlord will charge)
- the term of the lease or rental agreement and how it can be terminated
- which expenses the landlord will pay and which the tenants will pay
- the amount of the security deposit
- how repairs and maintenance will be handled, and
- whether pets are allowed and if so, on what terms.
The lease or rental agreement will probably also include terms about who may occupy the property and what happens when a tenant leaves. This is where your group may need to do some negotiating with the landlord.
Ordinarily, the landlord will want to list all tenants who will live in the house, by name, and expressly prohibit anyone who isn't in the written agreement from living there. The reason for this is to protect the landlord's investment: Not knowing who's living in the house means the landlord can't screen tenants to make sure the people in the house take good care of the property and are able to pay their rent. Even though all of the tenants are equally liable to the landlord, a sensible landlord would rather have money in the bank and well-cared-for property than a right to sue after something goes wrong.
This means a few things for renter groups that want to decide who they will live with: You will have to come up with some way for the landlord to approve new tenants, for new tenants to be added to the lease (and former tenants to be removed), and for the security deposit to be equitably apportioned among you. Of course, your landlord will have to approve whatever you propose.
- Choosing new tenants. When a tenant leaves, you will undoubtedly want to decide who moves in with you. And your landlord will likely want to make sure whoever moves in will be a good tenant. A good solution is to propose that your group find prospective new tenants, subject to the landlord's veto. This makes things easy on the landlord and protects everyone's interests. The landlord may ask prospective tenants to submit certain information to make screening easier, such as a credit report or references. As long as your landlord is reasonable, this arrangement should work well for everyone: After all, neither you nor the landlord wants a new tenant who won't pay the rent or take care of your home.
- Changing tenants on the lease. It's in the interest of both your group and the landlord that the lease or rental agreement accurately reflects the tenants who are living in the house at any time. The agreement is a contract, and whoever is named in it is responsible for carrying it out. If you don't keep it up to date, a former tenant who is still named in the lease could be legally liable for damage to the house long after moving out; likewise, the landlord might have no legal recourse against the people actually living in the house who caused the damage. To change tenants on paper, you'll need a couple of agreements: one between the former tenant and the landlord, releasing the former tenant from the lease or rental agreement, and one between the new tenant and the landlord, adding the new tenant to the contract.
- Handling security deposits. If you'll have tenants moving in and out, your landlord doesn't want to be bothered with inspecting the property every time, handing over some portion of the deposit to the departing tenant, then collecting that portion from the new tenant. Instead, the landlord will want to charge a security deposit when your group first moves in, then inspect the property and give the deposit back, less any amount withheld for damage to the property, when your group moves out. This means your group will have to decide among yourselves how to manage the deposit—and how to make sure departing tenants pay for any damage they've caused.
Handling Expenses, Security Deposits, and Rent Payments
Both the renter group and the landlord will probably feel at greater ease if the group opens a joint bank account. It shows the landlord that you are organized about your finances and take seriously your responsibilities as a group, and it is convenient because the landlord must process only one rent check per month. The group bank account also allows you to simplify and centralize payment of expenses. You might want to use the account to build a reserve fund for unforeseen expenses, too.
Deciding how much rent each person pays can sometimes be contentious. What if a house has four big sunny bedrooms and a cave-like bedroom in the basement? Should the person who lives in the cave pay less rent?
In some group houses, tenants pay equal rent but allow people to move into nicer rooms as they gain seniority and others move out. How much rent should a couple who share a room pay? And what if one tenant uses a larger or smaller share of the common space than the others—for example, if one tenant uses the whole garage, sets up a desk and computer in the living room, or spends very little time in the house?
In group houses, it often makes sense to share expenses beyond rent and utilities. Some group houses pool resources to buy dry goods, household supplies, food, and appliances. You can track expenses and divvy them up every month, but that might mean a lot of time in front of a calculator. You can simplify expense sharing by estimating monthly expenses and creating a household budget. Each housemate then pays a fixed amount into the group account each month, from which you pay expenses.
Some tricky questions may come up with regard to sharing expenses for things you use unequally. For example, what if most of your housemates use cell phones and only a few share the landline? What if some of you eat most of your meals out? You'll probably have to discuss and work out issues like these after you've lived together for a while and have a sense of each other's habits.
And note that the most common advice we hear from people who share housing is this: It works better to overlook minor inequalities, and try not to nickel and dime each other for household expenses. A spirit of trust and generosity is likely the most valuable asset in your household.
As mentioned above, your landlord most likely won't want to hassle with changes to the security deposit every time someone moves in or out, so you'll need to come up with your own system. One way to handle it is to have all original tenants pay a share of the initial deposit. A new tenant can pay the departing tenant for the latter's share of the deposit. For this to work, however, your group will have to make sure—typically, by inspecting the property—that the departing tenant deserves the entire deposit share back. Any damage that tenant causes will ultimately be taken out of the group's security deposit, so it's only fair to ask the person who caused it to pay for it.
Be sure to think about how you are covered in the event of a loss. It is probably best that both the renters' group and the landlord carry insurance.
Usually, the landlord will carry an insurance policy that covers the building and some liability; your renters' insurance will cover your personal property and liability. You may be able to get renters insurance as a group, and it's possible that individuals could get insurance. However, insurance companies sometimes don't want to provide insurance to one renter in a group house unless all renters in the house carry renters' insurance, because a tenant that doesn't have insurance might try to make a claim on someone else's policy.