From time to time the dynamic between the residents in a household can change and therefore the needs of who will, or will not, be on the lease may need to change. Having a good understanding of how to navigate the most common roommate changes is important so that all roommates are on the same page and that the household can make a decision that is in their best interest. For the purposes of this blog, we will refer to any two adults as roommates to keep the language consistent though this can apply to husband and wife, domestic partners, parents, sisters, brothers, et. The following are the four most common Roommate Changes.
Scenario #1: Adding a Roommate
Assuming that the property is large enough to house an additional individual (confirm with your property manager), then the next step is to have the new roommate submit a formal rental application. Since the household has already been vetted on income and rental history, the focus of the application for the new roommate is mainly on making sure there’s no evictions on file as well as nothing that may pose an issue on the background check. Assuming these comes back clean, then the proper addendum can be prepared to add the new roommate to the lease.
Scenario #2: Removing a Roommate
The key question from an owner’s perspective when trying to remove one (or multiple) roommates is, “Are the roommates that are staying behind financially able to still pay the rent?” There’s a ratio called Income-to-Rent Ratio that helps determine this and the ratio is ‘Three Times the Rent’. What this means is that the household’s gross income must be at least three times the rent in order for the roommates that are staying to qualify on their own. To prove this, the roommates that are staying behind will need to submit current documents (paystubs, bank statements or tax returns) to confirm the income. If they do, then an addendum can be drafted to formally remove the roommate that’s moving out from any future obligations to the lease. If the income from the roommates that are staying does not meet this minimum, then Scenario #3 will come into play.
Scenario #3: Roommate Moving Out & Keeping the Rental Agreement in Place
From time to time the dynamic between roommates may change and not be positive. This may lead to having some roommates want to stay while others may want to move out. When possible, best-case scenario to make a clean break in the lease is to follow Scenario #2 in being able to verify the income. However, if this is not feasible then the only scenario that will happen is to have the roommate that wants to move out do so but have everyone understand that the current Rental Agreement (Lease or Month-to-Month Agreement) and all the obligations will stay in place. It is important to understand the pros and cons for all parties:
- Roommates Moving Out: The roommates that are moving out must understand that the rental agreement in place will stay in place and therefore their name cannot be removed from the lease. While a roommate may be able to move out at any time they desire, this does not remove their current or future obligation to the rental agreement. They will still be responsible for any financial lease obligations such as rents and/or property damage that the roommates that stay behind may experience. In addition, it is important to note that the security deposit will still be held in reserve by the property management company up until possession of the property is given back and all roommates have move out.
- Roommates Staying: The roommates that are staying behind must understand that the roommates that are moving out still have the same rights to the rental home as before. Should the move out roommates ever decide to come back they could not prevent that by changing the locks.
Scenario #4: Official Move Out
As you can imagine, a lot of times the dynamic of Scenario #3 makes things a win-lose for the roommates as it can be a win for the roommates that are staying behind since they get to stay in the property but a lose for the ones that are moving out as they are still held responsible for the obligations to a rental agreement in which they are no longer getting the benefit from. With this in mind, few situations that start out as Scenario #3 stay in place for very long and most often than not the household will choose to officially move out and go through The Move Out Process so that all roommates can dissolve their obligations to the rental agreement and to each other. It is also important to note that the Security Deposit will stay with the property up until all roommates have move out therefore Scenario #2 or Scenario #3 will not trigger a partial security deposit refund.
CONCLUSION
Life can take multiple turns and sometimes a roommate change will be needed. The above scenarios are the most common ones and it’s important that all roommates have a thorough understanding of different options so that a decision can be made in everyone’s best interest.
