What Is a Joint Lease Agreement?
A joint lease agreement is a type of contract between two or more parties (often but not exclusively individuals) that concerns the tenancy of a specific property. The agreements are signed by all involved parties and become legally binding under relevant landlord-tenant and real estate laws. This type of lease agreement differs from a standard lease agreement in that it obligates its signatories not only to observe the terms and conditions of occupancy , but also to bear fiscal responsibility for the entirety of the lease as well as the property itself. A person in violation of the terms of the agreement can be held liable for damages, lease violations, or non-payment of required rent.
Generally, landlords will utilize this type of lease agreement when multiple parties are sharing a particular space. It may be a home, a business, an office, or other type of rental property. When co-tenants sign a joint lease agreement, they are essentially treating the property as a form of a business with shared personal ownership and responsibility for the joint and severable terms of occupancy.
Joint Lease Agreement Basics
As is the case with any type of lease, joint leases are always accompanied by terms that outline certain rights and responsibilities. For example, one of the key components in any lease is the obligation to pay rent. In this case, this requirement specifically falls on the landlord to collect the joint rent from all of the tenants living in the rental property. In situations where the rent is not paid, the landlord is able to pursue legal action against the entire group of tenants to recover this payment.
In addition to paying rent, the tenant typically has other obligations in the lease as well. For instance, it is not uncommon for joint tenants to be jointly and severally liable for any other damages to the property, so that if one tenant damages the property during his/her stay, the landlord can pursue any damages from the group as a whole. Conversely, if a tenant believes the landlord has damaged the property in some way (such as failing to complete a needed repair), the tenants can choose to collectively seek compensation or restitution from the landlord.
Another important factor for tenants to consider is their rights and responsibilities with regard to the security deposit. It is typically recommended that one of the tenants collects the security deposit from each person in the group and holds onto it until the end of the lease. Then, the group can collectively decide how to distribute it based on who damaged what, and if the landlord has compensation coming to them, if repairs need to be made.
The statute of limitations for breaches of rental agreements may differ depending upon the state, but most states allow for a six-year period for tenants and one year for landlords to initiate legal action.
Benefits and Disadvantages of a Joint Lease Agreement
Pros:
Sometimes, it can make financial sense to enter into a lease with someone who is going to be your roommate or co-tenant. This is particularly true when there is a rent reduction for additional occupants, which can occur for several different reasons. Some landlords make the rent for a two bedroom apartment less than the cost of two affordable studios. Sometimes, there are just bonuses associated with having a friend as a co-tenant. In those cases, you are splitting a bill with somebody you know and like.
Cons:
Having a co-tenant can be a mixed blessing. On the one hand, you might get to split the rent and utilities. On the other hand, you will be liable for any damages caused by that tenant or even any non-tenant guests they may have over. Creditors and landlords will hold all tenants responsible for any debt, including damages. If your roommate doesn’t pay their share of the bills, you may end up having to cover that cost. If they don’t pay rent, they can’t be evicted without your consent. You must both decide when things are considered to be unsafe in the apartment, at which point you would have to take your chances and hopefully have a landlord willing to cooperate. For example, what if there is a fire in the kitchen? It could simply be an accident (or it could be an attempt to cook a burger in the microwave), or it could be an intentional act to get the renter out of their lease. It can cause all sorts of damage, and now you’re stuck with the consequences. Even more difficult is trying to figure out how to divide responsibility. You don’t want to be responsible for your co-tenant’s family members staying over for a week, yet sometimes the rent makes it necessary to allow that. Who is going to pay the extra $100-200 in utilities?
Obligations of Tenants in Common
In a joint lease situation, existing tenants might be under an impression that they are only liable to the value of their respective shares in the apartment. However, such an assumption is far from reality. The law recognizes joint and several liability for parties who have entered into a joint lease agreement. Joint and several liability means that each party is jointly and separately responsible for the terms of the lease, and a landlord can hold any one party liable for the full amount of rent and any other obligations under the lease. For instance, if two people have signed a lease agreement with a joint and several liability clause, either of them can be held fully or criminally liable for the entire amount of rent or any other obligation pursuant to that lease, even if the other person was the only user of the property during the lease term. If your landlord has not been informed of the full occupancy in the apartment, it can lead to legal issues. If it is discovered that the property is being occupied by more people than allowed by that person’s agreement to lease, or in breach of notice of assignment rules and regulations, then both the sub-lessor and the new tenants can be held responsible for the contravention. Further, a landlord may commence proceedings against one or all of the parties that have entered into a joint lease at any point in time; the landlords do not need to issue notices of default. Simply entering into an agreement with other individuals for rent reduction or avoidance of increase is unlawful as per section 6 of the Apartment Ownership Act. Since joint tenancy in a lease agreement leads to several and joint liability, unilateral decisions in a joint tenancy arrangement can prove costly for one of the parties. Even if the tenants have amicably agreed to maintain the property, without the knowledge of the landlord, if the condition of the property deteriorates, all the parties who entered into the joint lease agreement will be liable. The Indian Contracts Act has no provisions to issue warnings before claiming damages under any provision of the Act, it gives immense power to landlords to claim compensation from its tenants.
How to Draft a Joint Lease Agreement
It is important to have an attorney review the jointly drafted lease agreement prior to executing it because the terms are specific and the language must be clear. A real estate attorney will ensure that the carefully chosen words do not seem like the "words of a lawyer" but that they fully and fairly capture the intent of the parties. An attorney will also allow for the effective negotiation of the lease terms which is extremely common for joint leases. It is helpful to have an attorney who is familiar with co-housing agreements and that supports them as he or she can advise about common issues, potential pitfalls and ways to navigate them. The attorney is also generally equipped to volunteer suggestions when asked about what structures can alleviate tension, such as renting as tenants-in-common or as specified tenancy. Finally, and importantly, an attorney may charge less than a mediator could and can act as a mediator in the event a dispute were to arise.
An attorney can also navigate between any regulatory issues that may affect the homeowners or tenants. For example, if you are renting a single-family house in a neighborhood originally composed of single-family houses, it may be difficult for a tenant to register the home as investment property. Rental restrictions, provided on the deed, bylaws or CC&Rs, will likely come into play.
There are several terms that should be considered during negotiations: Rent and security deposit; Use of the property; Maintenance and upkeep; Termination of lease; Sale of property; Assignment of lease; Insurance; Eviction procedure; Forwarding address requirement; Rent increase; Parking; Garbage removal; Quiet hours; Sex Offender Registry; Fees for delinquent rent; Tenant fees; Dispute resolution; Mediation; and Condominiums.
Rent and Security Deposit: Rent is typically paid to the owner or landlord and many times the lease agreement indicates that the tenants split the payments equally , or a percentage of the rent based on the square footage of each tenant’s bedroom. The rent can also be paid based on the proportionate interest in the property. However, this method is only advisable for such parties who have little to no equity in the property and are not on title. The security deposit should be maintained by the landlord/owner and returned to the tenant(s) within 30 to 60 days after the tenant(s) vacate the property.
Use of the Property: Generally, the primary use of the joint lease will be to reside in the property, however there may be other purposes for which the owners and tenants may want to use the property, such as conducting business, renting out rooms, etc. In addition, some additional details to consider are whether sub-leasing is permitted and what happens to the furniture in the apartment if a tenant moves out. Each joint lease agreement will be different.
Maintenance and Upkeep: Each joint lease agreement should include how and when rent must be paid, how joint decisions are made, method of communication between tenants and owners, rules for resolving conflicts, responsibility for purchasing shared and individual household supplies, methods of cleaning the shared areas of the building, how and/or when the utilities are turned on and off, trash removal, lawn care (if applicable), snow removal (if applicable), maintenance of swimming pools, hot tubs, jacuzzis, saunas, beaches, ski and bike resorts, etc., and payment of bank and HOA fees (if applicable).
Dispute Resolution Protocols for Joint Lease Agreements
A common concern for landlords and tenants alike is potential disputes due to various factors. Landlords often worry that their co-tenant is not carrying out their lease obligations, including making timely rent payments, maintaining the property, and obtaining required consents or approvals. Similarly, tenants have legitimate concerns over the potential actions or inactions of their co-tenant and its ability to satisfy its lease obligations. It is also important to keep in mind that a co-tenant on the same lease may also be a competitor of partner to the lease. Even if they routinely cooperate, the other party’s competitive interests can motivate them to act at odds with their co-tenant. The more risk or reward associated with one another’s success or failure at the property, the more likely they are to be in conflict.
In the event that disputes do arise, the first step is to refer to the lease to determine if and how the lease addresses the dispute. Even in the absence of a specific lease provision addressing the situation, disputes between co-tenants are typically governed by state statutory provisions or common law. At the outset, landlords and co-tenants should seek to amicably resolve the difference without resort to legal action. However, if amicable resolution is not possible, the parties may wish to use mediation to resolve their dispute.
If the dispute cannot be resolved through amicable means, pursuing a lawsuit typically is the next step. If the co-tenant is the one that is not fulfilling its lease obligations, the landlord may want to file a breach of contract lawsuit to terminate the lease and evict the co-tenant. The affected co-tenant may elect injunctive relief instead of eviction, in which case the court would order the other co-tenant to perform its lease obligations and/or refrain from interfering with the other co-tenant’s use and enjoyment of the property.
If necessary, joint lease agreements can include formal dispute resolution provisions, including mediation and arbitration, to require the parties to resolve their differences without disturbing the landlord. Alternative dispute resolution (ADR) has been increasingly used in place of litigation because the process is often less expensive and time consuming. In addition, since ADR is private, business secrets and sensitive information typically are not made a matter of public record. Furthermore, when proceeding under a joint venture or similar arrangement between co-tenants, formalizing the dispute resolution process can be beneficial by reducing the chances of disputes arising and facilitating amicable resolution when they do occur.
Signing a Joint Lease Agreement Securely
Many landlords require roommates to undergo separate background checks. This is not just a formality. It can be a way for landlords to protect themselves from losing money because of a non-paying roommate.
Submitting an application is not the same thing as signing a lease. Roommates should understand that if their roommate is accepted with another tenant and they are rejected, there may be nothing the landlord could do in order to add them on as a tenant.
Roommates should also make sure they have a larger security deposit than normal. If something breaks, the landlord may hold all tenants equally responsible or expect them to split the costs evenly. For example, if the roommates break something worth $400 , then the landlord may require each roommate to pay $200.
Roommates should also establish rules before signing a lease. The easiest way to do this is to write down the house rules. Examples of rules that can be written down include:
While it is not common, some lawyers advise against signing joint leases for various reasons. One reason is that if one tenant does not pay rent, the entire group could be forced out. Other reasons include poor mediation systems that could make it difficult to resolve conflicts between roommates. Additionally, moving out can be difficult because some landlords have strict policies about obtaining permission or paying double rent.
If any of these concerns apply to you, you should either talk to your future roommates and start negotiating a new lease or look for a different apartment.