Renters who are strangers and yet will be roommates can present landlords a challenge when leasing rental housing. Here are 3 safeguards to consider when renting to these types of occupants.
By Ellen Calmas
While individual renter households represent the highest volume growth since 2007, non-family roommate renter households have grown at almost twice the pace, or 2.9 percent over the same period, according to recent Axiometricsdata.
That’s an increase of 20.7 million “non-family” households consisting of either one person or two or more roommates. That represents growth of 330,000 people per year sharing apartment homes. And, potentially a lot of hassle for landlords and property managers who do not have clear policies in place.
Renting to Non-family Roommate Renters
Typically all parties applying for a lease have to meet screening criteria. But what happens when one roommate’s screening is up to snuff and the other’s isn’t?
That’s where corporate policy comes in. Most companies consider each party jointly and severely responsible for the lease. The question still is, “Do you use the lowest screening score or the highest in determining whether applicants are accepted outright or with conditions?”
Think of college friends who decide to move in together. They will experience their first taste of independence and new jobs. One person not taking rent seriously is enough to ruin a relationship. And it could leave the landlord with a problem.
The situation can be worse in situations where two strangers decided to cohabitate after matching profiles on a roommate listing site. They may feel little if any obligation to act responsibly toward each other or the rental home or apartment community. They may only consider themselves obligated to pay their fair share.
There are potentially messy interpersonal issues that come when people share an obligation. However there are safeguards landlords can put in place:
3 Safeguards for Landlords For Roommates Who Are Renters
1. The conservative approach is to use the lowest screening score in developing lease offers for renters. Treat both residents as conditionally approved while collecting some extra deposit or other protection for the landlord. Requiring each roommate to pay a security deposit is the usual course of business. It creates ‘skin in the game’ for each person and provides protection to each roommate in the event of damage at move out.
2. Alternately, some landlords require each roommate to provide a guarantor for a portion of the lease or requiring one guarantor for the entire lease. In the college graduate scenario this is usually the parent who has the best credit so both roommates and qualify. In roommate match-up scenarios it can get trickier.
3. Providing payment options that protect on-time rent delivery has also become a strategic amenity. Landlords are finding that simply requiring automated payments with roommates isn’t enough. Some are turning to options like rent from payroll. This involves direct deposit from employer payroll of a portion of rent every time each roommate is paid to a bank account neither person can withdraw from. These programs also allow flexibility if one roommate will be responsible for a larger portion of rent.
4. It’s also important to be clear about late fee policies for rent in arrears and the potential legal consequences to all involved if one roommate fails to perform. All parties need to realize the implications of financial commitments.
Finally, cross your fingers. Staying together is tough enough when residents are related or in a relationship. Things can get really tricky if not handled well.
About the Author:
Ellen Calmas is Co-Founder and Executive Vice President at Neighborhood Pay Services, the company that pioneered the only payroll direct deposit platform for multifamily, NPS Rent Assurance. Life is good when we achieve our mission of making payment assurance the catalyst for improved economic occupancy among hard working individuals who need help securing a place to live.
Roommates photo credit By Tulane Public Relations (Roommates Uploaded by AlbertHerring) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons