Roommates are fine, sublease is not

We were recently asked by a member about an unusual situation after a tenant moved out. The tenant had given a 30 day notice to vacate. Once the tenant moved out, the manager noted excessive damage to the unit. Unfortunately, the manager did not send the deposit disposition within 21 days, leading to inquiries about the late return from not one, but two different parties. The original tenant had sublet the unit to another party without the manager’s permission. Both claimed to be entitled to the security deposit.

With today’s high rents, shared housing has quickly become very attractive to owners with an extra room and renters for a variety of reasons. Many places have appeared that offer sublet units such as Airbnb, HomeSuite, Roomoram, Craigslist and Sublet.com. On the other hand, it has also become a concern for rental owners who are unaware that their tenant has sublet part or all of their unit.

Subleasing or having roommates has become popular for a couple of reasons. A property owner, especially someone on a fixed income, may rent a room to offset some of their recurring costs, allowing them to stay in their home after retirement or when facing a change in financial security. With today’s high rents, renters can choose units with better locations and amenities that are still affordable while cutting costs by half or thirds. Where it all goes wrong is when the tenant rents out a room or a portion of the property without the knowledge or consent of the landlord.

All rental agreements must include a clause addressing sublease that states the tenant may not rent, assign, or sublet all or part of the property without the owner’s written consent. If violated, the owner must reserve the right to terminate the agreement. This is not to say that a landlord will discourage roommates. This is to ensure that the landlord has approved potential occupants.

With our current high rents, more people are looking to share housing. It is not uncommon for two, three or four people to rent together. Owners understand that sometimes situations change and while one resident wants to leave, the others choose to stay. This is where communication is so important. The roommate leaving must give written notice of their intention to vacate. The rest of the tenants must express in writing their desire to stay. Ideally, the remaining tenants find a new potential roommate and that prospect submits an application for landlord approval.

Rent controlled cities have created additional concerns regarding subletting. Rent control has kept long-term tenants at artificially low rents. Often when the tenant wants to move, he is faced with the dilemma of giving up his below market unit which will no longer be available for low rent should he decide to move back into the area. By design, this encourages tenants to illegally sublet their units. Not only can they keep their rental unit low, but they can rent the unit for much more and make a profit.

It is important for a landlord to know who lives on their property. Tenants must be allowed to open their home to temporary guests. However, a well-written rental agreement should define when the temporary guest becomes a permanent resident.