How to avoid rental defaults when tenants split
It’s quite common for landlords to rent apartments and houses to multiple tenants, but they need to make sure they’re covered in the event of one or more of these tenants moving out before the lease expires.
It’s the end of the year and a lot of things are changing. People are getting married, divorced, moving in and moving out for a fresh start to the new year. It might happen that one leaves the other behind for other accommodation.
It’s quite common for landlords to rent apartments and houses to multiple tenants, but they need to make sure they’re covered in the event of one or more of these tenants moving out before the lease expires. This is according to a statement of Greg Harris, CEO of Chas Everitt Property Rentals
“We see this all the time, 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,” he said.
“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.”
He went on to explain that 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 said, 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 flit’ 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 which can not only advertise for new tenants but conduct proper credit and employment checks before allowing them to take occupation,” Greg explained.
He also said that there is an alternative option for landlords, which is to make one tenant in a multiple-tenant situation the ‘primary tenant’ 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.
However, we do not generally 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.” he said.
In addition, he noted, it can prove difficult to physically evict sub-tenants, even if you get a court order to evict a primary tenant who is in default, and can 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 the 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.” Greg explained.
Nevertheless, some landlords do prefer this set-up and once again the keys to avoiding problems are an experienced and diligent managing agent 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.
“The lease 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.” he concluded.
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