Leases, subleases, and master tenancy, oh my!
A sample (sub)lease agreement, and why you should use it
One of the greatest things about coliving is living with your friends. One of the most awkward things about coliving is sharing finances with your friends.
I’m not talking about kibbutz-style merging your finances and sending your paycheck to a common bank account. (You’re welcome to try! Let me know how it goes). But since rent or a mortgage is the largest single expense in most people’s budgets, you are de facto entering into big, important financial agreements with friends.
As we’ve gone over in previous posts, it’s unlikely you’re going to have a set of friends who can all move into a house at exactly the same time and split all costs equally.
Some may have saved enough for a down payment on a house and some may be paying off student debt. Some are enthusiastic about coliving today, but life happens: job offers in distant cities beckon, partners invite partners to move in, family needs or unexpected expenses make people re-prioritize what they’re willing to spend on housing.
Which all means that in most coliving situations, some folks are going to be landlords and others will be tenants. The landlords are able and willing to make a long term commitment to the community. The tenants want more flexibility.
A quick side note to clarify terminology:
If the coliving house/apartment is owned by an individual or group in the community, they are the landlords, and people that rent from them are the tenants.
If the space is rented by an individual or group, they are the master tenant(s). If they then rent to others, they can also be called sublandlords, and the people they rent to are subtenants.
For the sake of simplicity, I’m going to use the terms landlord and tenant.
It can be tempting for landlords to let tenants move in with an informal handshake agreement. You trust your friends, and it can be awkward to ask them to sign a document outlining the terms of your financial relationship. And as Phil points out in his post on Why You Should Tip Your Landlord, the terms landlord and tenant are fraught with baggage.
But it’s much better to have a little awkwardness up front than a major disagreement down the line that ends up ending a friendship and/or ending up in court.
I’ve had otherwise lovely tenants (and friends!) think it was ok to move out with a week’s notice because ‘we found an incredible deal for just the two of us, and there are so many people who want to live here so you’ll have no trouble filling the room.’ While it’s true we had a lot of people who wanted to move in, it takes time to vet folks and there was no guarantee I’d find someone who wanted to move in instantly. Thankfully, I was able to point to our sublease agreement where we stipulated 90 days’ notice to terminate the lease. They were free to move out, and I would work on finding a replacement as soon as possible, but until that person was confirmed they were liable to pay rent for up to the next three months. Once the situation was explained, they helped find a new tenant and luckily didn’t have to pay double rent at all.
Having a reasonable sublease agreement in place helps ensure risk is shared between the landlord and the tenant in a way that works for both parties… and keeps your friendship simple.
Here is a sample simple sublease agreement, with some notes in italics. This is not legal advice, and you should familiarize yourself with housing law in the state where you’re coliving. I can’t guarantee that having a sublease like this would lead you to win in court if you had a (sub)tenant who violated it. But having something concrete in writing is in all cases better than having nothing at all.
There are also a few coliving-specific things in the lease I’ll highlight here:
Notice period: in many US states, if no additional lease is signed after the initial lease, it is assumed that the tenant can stay month-to-month. In a coliving house, where community is so important, it’s helpful to have extra time to recruit and vet great folks, so we recommend a slightly longer notice period.
(Sub)subleasing: in the same vein, the community should get to decide who lives in your room if you’re out of town for a period of time and want to sublease, so they don’t end up having to live with random folks while you’re not there. I recommend not allowing (sub)subleasing by default, and negotiating exceptions on a case by case basis.
Personal belongings: it can be tempting for any resident to think there’s SO much space in the house, it won’t matter if I leave my camping gear in the common closet… and if I’m moving out but haven’t yet figured out the next place I’m going to be I could just tuck it away in this corner… but common space is finite, and usually quickly filled. If residents have big things they want to store in the common spaces of the house, there should be an understanding that they’re doing so at their own risk, and that they’re not automatically entitled to leave their piano, favorite couch, bike, and shoe collection in the common spaces.
Here’s how I suggest going about any (sub)lease:
Agree on terms that work for both of you: a fixed period of time, or a rolling lease with a set notice period (eg 90 days). If you don’t know each other that well, or aren’t sure how much you’ll enjoy living together (reasonable!), you can also do a trial period: sign a one month lease with an expectation that you’ll sign another longer term one if all is going well.
Both parties should sign the lease. I use hellosign to automate signing documents - there’s a free plan that allows for 3 documents/month.
Make sure the tenant sends a deposit to save their place.
Have you done things differently at your coliving space? I’d love to hear about it in the comments. And if you found this useful, please consider sharing!
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