The majority of the real estate holdings I have are single family homes. We have one duplex that periodically makes us scratch our heads when trying to rent it.
Case in point. This weekend my wife showed the open unit to a nice woman and a 7 year old. She is very interested and financially and rental history she would be a good renter. Later we find out the 2 BR unit would be for not only her and the child but additionally a husband, and two teenagers.
We've never thought we needed to set a cap on occupancy but two adults, two near adults and a grade schooler seems very tight and we're not really ready to have huge water/sewer bills associated with what would be a lot of people in this property.
Do we have to rent this apt. to this family? We did not mention a cap on occupants when showing the unit. I'm fine with families but I don't want to see another room turned in just to fit the extra individuals of differing sexes and ages. (this is an assumption on my part)
You should Google your county's law regarding housing and occupancy and just reflect that.
We have a small 2BR house (600 sq ft) for rent. A lady expressed interest in it one day when I was there working on it, so I walked her through it. She came to our office a week or so later to put in an application. As we talked, she told us that she and her husband have 6 kids between them, "But they don't all live with us, so they are only all there at holidays and stuff."
I can't imagine having 8 people in that house all at once for more than an hour or two.
As Nicole mentioned, looking it up is advisable. For a short cite, Nolo's Every Landlord's Legal Guide 110-115 (12th Ed) goes on in depth on the issue. Yes, classic answer: it depends. Depends on the type of unit, your jurisdiction (state and local rules could apply). There is a vague federal HUD memo and some cases out there... Generally two people per bedroom is a common standard mentioned... But...
Your main issue, however, would be the counter-policy of preventing family discrimination. My view is that the laws and standards can have some tension here. Clearly, HUD, state and local housing agencies (plus fire depts and municipalities) want to prevent landlords from packing in like sardines--unsafe, unsanitary, not enough space, parking etc...
However, in the next breathe most of these authorities also prohibit discrimination against housing to families or children (unless a senior development or something)... So you are close here with 2BR and 5 people (if I understand it correctly). And much of what I read says to err on the side of caution. So occupancy standards may not be sufficient criteria here. But research more or get advice if you want more information.
I'm just starting out myself so I'm by no means an expert. But I was reading recently that the Fair Housing acts prevents discriminating against families with children. That includes setting occupancy so low that no family with children would qualify. So unless there's a fire-code-based occupancy limit, you should be careful here.
"Some landlords try to get around the laws prohibiting discrimination against families by setting unreasonably low occupancy limits, such as only two people for a two-bedroom unit. This too is illegal, as it has the effect of excluding families."
If your rents are not high enough to cover the water bill of a family, you might consider raising your rental rate. For this to be legal, you have to raise the advertised (and actual) rate for everyone, not just families.
Typical occupancy of 2/bedroom plus 1 would be within limits depending on the size of the two bedroom. To handle the excessive water use in RI I have a statement in the lease that we can charge for excess use (regardless of number of people). I only had to do it once. Not sure how this works in your state but you could have a supplement if the sewer goes above a certain average rate you charge the overage. This would not be because they have more people but we have it in there for everyone. Being a duplex this could be more difficult though if you have one bill.
Is there something about the duplex configuration that makes people think it can handle more people? Large bedrooms or a basement that is viewed as extra sleeping space?
I think you can deny based on occupany quantity. your town may have restrictions as well that you can put on your side. I have said no in these instances and that was the end of it. more suitable tenants came along and I rented to them.
I would check with the town. Where I am from, there has to be x amount of personal space for each individual living in a particular house or unit. This is how you are able to filter these things. If you don't want to rent to these particular people... don't. But whatever you do, don't tell them it is because they have too many people than you would like unless you have facts backing up an actual restriction, ordinance, or guideline. If they wanted to push the issue, they could contact the Human Rights Commission, so better off saying less than morel.