College Roommate Switch Out

10 Replies

Hello All, 

I was hoping to find some advice from landlords who may have faced similar problems. We manage many units, mostly in the LSU area of Baton Rouge, and they are all individually owned. As such, we only accept a single deposit for the unit and a single monthly payment. The tenants sign ONE lease in all of their names, and it is a shared liability. We also require parent/guardian guaranty forms from each of the college tenants. While the tenants each pay into the security deposit, we collect the check from one individual and it is returned to that person or their guardian.  We do not do individual leases (by room), roommate matching, or individual payments, as this amounts to 3x the workload (with most of our units being 3 BR). 

The problem we face are Roommate Switch Outs, either at the end of lease of mid-lease. Since we only collect the one deposit, typically the new roommate moving in would pay their portion of the SD directly to the old roommate moving out - unless the roommate moving out originally wrote the SD check, then we would have them sign a transfer of deposit form. The problem comes when the new roommate pays her portion to the old roommate (who may have spent years there), the old roommate typically receives her full portion of the deposit back, and then a year later when they all move out we perform and inspection and charge the deposit as needed. The new roommate then ends up paying for damage that may have been caused by the previous roommate, especially in the common areas - in the end, the newest roommate feels they are being over charged while the previous roommate go their entire deposit back. 

We do inspect the room between tenants and any work needed would be billed to the previous tenant, but it is hard to determine that in the common areas, especially when two people are still living there. 

If anyone has any advice that may help this situation short of signing individual leases or individual deposits, please share. This was a little hard to put into words, so if further information is required, please ask. 

Thanks, 

Bryant Cheely

I would also like to add that when it is 2 roommates wanting to switch leaving only one original roommate, we collect a new deposit and perform a complete inspection other than the one remaining tenants' bedroom. We then sign a new lease with the two new roommates and the original. 

Thanks again, 

Bryant Cheely

We have a procedure for adding or releasing tenants from the rental agreement. The security deposit always stays with the unit and share of it must be worked out among the tenants. It is paid out in one check in the names of the tenants remaining when possession of the unit has been returned to us after we have finished our final report and accounting. 

We do periodic inspections of all of our properties and charge for damages as they occur. When there is a change of household makeup we do an additional inspection and ask the tenants of any known damages, since we can not see everything when there is furniture in the way. We emphasize that regardless of who is in tenancy at the end, the unit will still need to be returned to us as it was when we originally offered it for rent. We show the original move-in check list to the incoming tenant so they are aware, because they will be assuming some risk.

We charge a move-in fee at the beginning of tenancy which the original tenants paid. It is okay to charge an administrative fee to the outgoing and incoming tenants for the extra time and effort required to take people off a lease and to add new people to a lease.

We also do month-to-month rental agreements. With such, we just terminate the previous rental agreement and then enter a new agreement with those who make up the new household. We charge an administrative fee for our effort.

So this is like you rent out a frat house and the tenants are moving in and out at the beginning and end of every semester etc?

You mentioned "common areas" but since there is no individual leases, I think the whole house is one big common area.

Not sure how you can really be 100% fair as to these security deposits and damages if things are so fluid.

@Bryant Cheely   we have a similar situation with our URI students. We don't have a lot of switches but it happens.  We have 9 month leases since it is a beach area there is little continuous leasing.  It sounds like you do only accept the deposit as one deposit for the house and have one lease like us.  We do some charging as you go if we see a problem.   In the end though we have found that when they don't get the whole deposit back they are never satisfied. It is usually the first or second time they rented and there is a learning curve for the students and parents stick up for their kids (it must have been from the previous tenant).   If requested for big items we will deduct from  specific tenants for a damage (all 3 agree only eric and tom broke the sliding glass door).  Other then that it is equitably divided between the current tenants.  I think the best you can do is a good inspection and charging for the known damages before the previous tenant leaves and make it clear that anything that turns up later is going to be charged to who is on the lease when it ends. If you need to fix that sliding glass door then invoice them before the change in tenants and they can figure out the division. The current tenant can also provide a walk through inspection sheet when they move in. It is up the them to indicate if there is something broken at the time. Otherwise it is assumed to have broken when they are there.

I personally close the entire lease out and than do the next lease when it was a military move. We have a break lease agreement otherwise we don't do switches. Have you thought about charging a fee to do switches? That way you can "cancel" the lease and restarted?

Thank you all for your responses. 

Charging a Roommate Switch Out Fee may be our best approach. This way the extra fund can be used to cover any disputes from the newest roommate or damages that may have missed inspection. Of course, if they didn't want to pay the switch fee, they could always move-out and sign a completely new lease with a new deposit and that would allow us to perform a full inspection as usual. 

@Marcia Maynard  Thank you for the suggestion of the switch fees. I also like the idea of adding a clause in the addendum about reporting damages and assuming risk. We don't want to offer month to month leases because these are entirely college rentals and we like to keep our leases in the summer cycle to stay in line with the college market. 

@Sam Leon   Not frat houses, these would be 2 and 3 bedroom condos/townhomes/houses. This problem surfaces mid-lease as well as when they want to renew with a new roommate. It doesn't happen all the time, but it is a mess when it does. By common areas, I am referring to the living/dining/kitchen/hallways. When one moves out it is easy to inspect and charge for damage in their bedroom but it is a little more difficult to determine who is responsible for damage in these "common areas", especially while two are still living there.  

@Colleen F.  You have a very good point there and unfortunately it's part of the business we are in - if they don't get the full deposit back they are never happy. A lot of our tenants are coming from these corporate owned developments with on-site management that allow little to no deposit and individual leases. It spoils them to an extent. As long as they leave the building standing they feel like we should return 100% of the deposit. The security deposit required on our properties is the equivalent of one month's rent. We also require our tenants to have the carpets professionally steam cleaned when moving out. They can either provide us with the receipt or have us do it and deduct the deposit. There is often cleaning and painting required as well, which we do factor in wear and tear for their length of tenancy and we do note which areas required what in the SD return so that it helps them divide the deposit  as necessary.  We also have them return a move-in inspection sheet within 2 weeks of move-in and walk through inspections are available upon request. 

Elizabeth Colegrove We also have a clause for breaking lease, but the majority of the time they are wanting to renew, just with a switch of roommates. We are hesitant to cancel and start new leases in periods other than the summer months, because in order to keep the leases in the summer cycle we would then have to sign shorter/longer leases than the standard 1-year, which individual owners don't love because of their leasing commissions - they would then run the risk of paying a leasing commission twice in one year. 

Again, thank you all for your responses. Very helpful information. I am going to put some thought into the switch-out fee, although my first concern would be them switching roommates without telling us to avoid the fee. Would need to add a clause to the lease and roommate switch addendum that put emphasis on the original roommates being held financially responsible until all parties have signed and fee has been paid. 

Thanks, 

Bryant

@Bryant Cheely  I'm having a hard time following what is going on exactly. Its early so excuse me if I am not understanding what is going on. From what I have gleaned you are having a hard time determining who to hold responsible for damages between roomates when moving new ones in and out? I hold everyone personally responsible for damages in my units. It doesn't matter who did it. It is spelled out in the lease. If you are doing a inspection before new roomates move in then wouldn't you know what damages were there from the previous occupants? It appears they are also asking for a new lease mid lease? 

I agree with @Marcia Maynard  . Charge them a "change of lease" fee. Outline in the beginning your procedure when it comes to adding and removing tenants. Since you are only signing one lease, then only collect one security deposit. The tenants will have to determine how to handle pay out the tenant moving out. Do a full inspection before a new tenant moves in & invoice the remaining tenants for any found damages. Let the new tenant know that they have 1-week to let you know of any damages you may have missed or they will be liable for it. My final thought is, is a lease working for you & would going month to month make more sense.

@Bryant Cheely   we are lucky here in that the deposit is pretty standard in the area. there are agencies with a lot of houses but no big complexes.   I am thinking they will dodge the change lease fee by not telling you. My best suggestion is have a walk through/move in sheet from the changed roommate and use the broken record technique when they complain" its not on the checklist you signed when you moved in as being broken".  The attitude is the same in our area even though everyone charges a deposit. they just don't think they broke anything.  Some of the students are worse then others.  Student rentals are furnished and i have to have a good inventory or they claim that wasn't here. We just try to follow the letter of the law and give very detailed accountings for damage.  Sounds like you do the same. We don't have carpet just some area rugs that I charge for replacement if they are bad so I don't build that in but we do have a cleaning fee that may be added if warranted.

@Rusty Thompson   I think what OP meant is there are difficulties and issues to do inspections while the home is still being occupied, which is the case when one out of three roommates moves out.  I remember during my college days we had tapestry over the entire ceiling, area rugs, dressers up against the wall, book shelves and milk crates of records and books, it's a real pain to do a thorough inspection.

@Bryant Cheely   when I said the whole house is a common area what I meant was when I rent a three bedrooms to two people who are roommates I don't assign rooms and bathrooms to each of them so I don't care who lives in which room and who cooks in the kitchen or not they are all jointly responsible for any damages anywhere.  I know during college there are times I switched room with others, just because one semester I am staying at the engineering lab late at night all the time, and instead of waking everyone up at 3am when I come home, I offered to move to the front bedroom and the other guy moves to the back.  We were also very flexible in that only one bedroom has a queen size bed the other all twin beds, so if one of the guys has an overnight guest he can just go use that room and lock the door and the rest of us will know to crash in another room.  The next day we may find a cracked headboard LOL.  So to me it seems easier if they are all responsible for the damages.  Now if amongst themselves they wish to sort out who should pay more or less that's their problem to sort out.  This may also lead to more self policing and earlier reporting of damages.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here