These days, renting a single-family home to multiple tenants has been increased rapidly, especially in high living cost areas. The reason behind this is, staying under the multiple tenant lease agreement helps renters save money. And, for landlords, renting a house to multiple tenants adds up more income than comparable to a single lease.

If you own a property you need to be more careful before providing a lease to multiple tenants. The more tenants share a lease, the more damages occur in the rental property. This article gives you proper guidance about leasing property. Here is an ultimate guide to a residential lease agreement for multiple tenants. Well, OKC Home Realty Services can help you managing lease agreements. Get to know What does property management companies do

Should you provide Lease For Multiple Tenants?

Leasing multiple tenants in a single property has both merits and demerits. There are lots of working youth who are just starting their career. In such a case, sharing a single-family rental home can be a good option for these individuals. Also, for landlords, multi-tenants properties lead to multiple tenants paying rent. This points to severe income. 

Eventually, Deciding to offer multiple tenant leases depends on your rental property location. If the location is in high demand and has high rental rates, you can go for it. As a landlord, you need to examine the market value and make better decisions.

What Should be Included in a Co-Tenancy Agreement?

Both Landlords and tenants much have a mutual understanding of the roommate agreements. The agreement should include the signature of all the tenants staying in the lease. Both parties must keep a copy of all the essential documents with all original signatures.

Here are the things that need to be included in the Co-tenancy agreement.

TermsIn Detail
Lease Each co-tenant needs to stick to the terms and conditions mentioned on the lease agreement or local laws.
Rent Each co-tenant agrees to pay their share of the rent. Roommates must be aware that they are Jointly and Severally Liable.
House RulesCo-tenants must agree to all the house rules like; overnight guests, cleanliness, noise, use of equipment and more.
ExpensesCo-tenants need to pay their share of utilities, food, telephone bills and so on. It is up to tenants how they divide the bills.
DamagesIf one tenant makes damage to the rental property, all remaining tenants are equally responsible. 
Security DepositSecurity deposits can not be split. For example, if one tenant is leaving a property, he/she can get his/her share of the security deposit. Everyone gets their share once the lease is vacant.
Terminating TenancyIf one tenant wants to terminate the lease, all other co-tenants need to agree in writing to release the old tenant from this agreement.
Replacement TenantThe new tenant must sign all the copies of the agreement before moving to the rental property. For that, every other tenant must agree. 
PetsTenants can keep pets if the landlord allows. 

Pros of Renting a Single-family Home to Multiple Tenants

Many rental property owners love to manage multi-tenant properties as their full-time job. For them, this is a huge benefit and a source of income. For some, this is a career. Investing in multi-tenant properties gives tax benefits exceeding business deductions and depreciation.

Some Benefits include:

  • Provides a higher rental income rate.
  • There is the least chance of getting a property vacant at any one time.
  • More renters cover rental income during vacancies.
  • Holding rental properties may command a higher market value.
Pros and cons of Multiple tenants lease agreement

Cons of Shared Lease Agreement

Some landlords face trouble from tenants. Some tenants don’t manage to live together in a good manner. Renting a house with roommates whom you have known for a certain period of time can be easier. Issues occur when the tenants are unknown to each other. If you are leasing your property to individuals who are unrelated, this can result in disputes.

The other disadvantage can be, the higher number of tenants leads to a higher rate of damages and tears to the rental property. Landlords can get more repairs and maintenance calls. Sometimes tenants don’t care about the rental property. Managing multiple renters is a lot more work than you think. Property tenant screening process should be followed in such cases. 

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How to Handle Disputes on Multiple Tenant Lease?

If you have decided to invest in Multiple tenant leases, be prepared for handling the disputes too. Here are some essential guidelines you should follow when leasing to more than one renter to a single property. This makes the process smoother for you and the tenants. 

Below are the strategies to follow and set both the landlord and the tenants up for a successful tenancy.

How to handle disputes on multiple tenant lease

Encourage Roommates for Rental Agreement

Landlords need to motivate their tenants to come up with a mutual agreement. Simply, a roommate agreement is a document signed by all tenants living in a single property. The document includes essential clauses, rules and expectations that every tenant should meet. 

For example, every tenant gives time for cleaning and safety, foods will be shared, bills will be split and paid and so on. 

The roommate agreement is a personal agreement between tenants and the landlord does not settle disputes. If any issues head up, they can address the problems and come up with a decision with the help of the agreement they signed before renting.

We have listed few issues that can create trouble in a near future.

  • Guest rules
  • Noise issues
  • Security deposits
  • Borrowing personal items
  • Whether food will be shared
  • How bills will be split and paid
  • Cleaning and other responsibilities

Say No to Subleasing 

It is actually landlords’ personal choice to allow or deny subleasing. Just make sure, each tenant is liable for meeting the terms and conditions of the lease. It’s just that, refusing to sublease your rental property will keep you away from the problems and make things easier in the long run. 

Due to some reasons, sometimes, tenants want to move out of the rental property. In such a case, they want to sublease their apartment which can keep landlords in trouble. 

As a subleaser aren’t directly involved in the co-tenancy agreement. They are not jointly and severally liable for the rent or other responsibilities stated in the rental agreement. It can get complicated if the sublease doesn’t pay rent on time or denies to pay one. You can not take legal action as they aren’t directly linked to the roommate agreements. 

Screening Replacement Tenants

Screening replacing tenants

Don’t make any limitations regarding screening tenants regarding income and credit requirements, background checks, or other requirements. It’s essential to protect your property by making sure you follow the tenant screening process

When the original roommates were excellent tenants, a landlord will add a replacement tenant to the lease without question. This can cause you problems. So it would be good if you consider screen replacement tenants. 

Go through the rental application before calling for an interview. This can save you valuable time. Take the help of the property manager. That is what they are for – making your job easier. 

Don’t Divide Security Deposits

The security deposit will not be divided and the landlord should mention this before leasing a rental property to the renters. 

Let me make this clear with an example. If the lease is 24 months and If one of the roommates decides to end the lease and the other stays, the deposits can’t be returned to the roommate who is leaving the property. That means the security deposit can be back once the rental property is completely vacant. It is up to tenants to come up with the solution and not to create any issues. Landlords aren’t involved in this. 

There are other things to keep in mind. I already mentioned above that the deposits are back at the end of a tenancy. Adding on it, landlords can deduct from the security deposit for any kinds of damages on the property. 

Let’s assume, 3 roommates paid security deposits of $300, each one contributing $100. When the rental home is vacated and the damage is evaluated, you discover that there is $100 worth of damage, and you can only return $200. You need to make sure the tenants know it will be returned in one check. It is up to renters to decide how to divide it amongst themselves. 

Recommended: Can Landlord Keep Security Deposit For Breaking Lease?

Make Clear That Actions of one Tenant can Affect Other

Before signing a lease, tenants should be fully aware of their actions. Property owners must let them know that one’s action can affect the other in the rental unit. A landlord can terminate the lease agreements for all the roommates if one tenant violates the part of the lease.

That means the action of one tenant can bring difficult situations to all the roommates. So, As a landlord, before you face with a group of unfriendly roommates;

  • Make them clear about the do’s and don’t. 
  • Keep reminding them about the rental agreement they agreed to.
  • Advise them to feel comfortable living with each other.

Joint and Several Liability Clause on Multiple Tenant Lease Agreement

Joint and several liability clause

The clause “joint and several liability” refers to everyone who signs the multiple tenant lease agreement. The tenants are responsible for rent payment. If one roommate can’t pay, that doesn’t mean the other tenant can only just pay their share and call it good. According to the lease terms, all tenants have to make sure the full amount of rent is paid every month. 

Hiring a property manager can make your job easy. Property Management OKC offers rental management services and works on essential documents. 

Motivate Tenants to get Renters Insurance

It is necessary to have renters insurance, as no one knows who might leave the door open, or if any accidents will occur. Tenants must know that their insurance is not covered by the owner’s Insurance. Tenants need to get the insurance on their own.

Encouraging tenants to get renters insurance can protect them from unexpected damages that occur on the rental property.

Renters insurance in Oklahoma can help you repair your property for the damages that unexpectedly occur. Renter Insurance provides coverage for an accident at your rental unit. 

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FAQs on Multiple Tenant Lease Agreement

How does a lease work with multiple tenants?

As a lease with multiple tenants makes them jointly and severally liable, you should only collect rent one way and one time when it is due. Also, the roommate’s agreement includes all necessary clause which minimizes issues.

What is meant by jointly and severally liable?

It informs that all the tenants who agreed for ” jointly and severally liable” should pay the rent on time and if one tenant can’t pay, that doesn’t mean the other can only just pay their portion and call it good. After the lease is signed, all tenants are equally responsible for the full amount of rent payments.

What happens if a joint tenant moves out?

If one of the roommates leaves the tenancy the other tenants may end up paying the missing rent if both of them had agreed for “jointly and severally liable”.

Can one person leave a joint lease?

If one co-tenant wants to leave a joint lease, they can end their own tenancy under a periodic agreement by giving a 21- day termination notice to the landlord and remaining tenants. After vacating the rental property as per their notice, they are no longer under the agreement.

How can you break your lease without penalty?

Tenants can break the lease agreement early for valid reasons, you just need to inform the landlord sooner. Some of them are:
If a tenant loses a job or transferring a job out of that place.
If a landlord violates the safety rules or harasses the tenant.
If a tenant has military duty.

Is it better to have two people on a lease?

When two or more people sign the same rental agreement, they are co-tenants sharing the same legal rights and responsibilities. And, one co-tenants negative behavior can affect everyone’s tenancy.

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