Sub-Leasing & Liability Help!!!

[James Gilpin]

Hi All, My good family friend has a property in a student area that he has asked me to rent out and look after for him. He was thinking a 3 year lease. He has told me that I can lease the property off him and then sub lease each room individually to friends. Basically after I rent each room out I will have a little bit of cash left over to keep. My questions are: Do I need a license to do this? Does his landlord insurance cover the sub-tenants if they were to damage the building? Could I be held liable for anything for the sub-tenants if the were to get injured or anything? Should I have something in the original contract in case I can’t fill the rooms? It seems like a great way to build some small cash flow with nothing down but want to make sure myself and the owner are clear for any liability. Thanks!!

[Frank Chin]

You would have to check local laws. In my area, there are regulations against rooming houses, and generally, it prohibits 3 or more unrelated people living together in the same house, unless the house is registered as a rooming house. So yes, in my area, you need a license.

Now, there are plenty of households with 3 unrelated roommates, especially if it's a SFR, because in my area, most SFR are 3 BR's and up. Where you get into trouble are your tenants get into trouble with neighbors, and they call and report an illegal rooming house.

For instance, I rented an SFR to a family of four. A house across the ways rented to several people as roommates. Houses in this area has driveways for two cars, and maybe a spot or two out front. And also, there's an unwritten rule you don't use spots in front of other peoples homes.

Now this house across the way, rented to 3 or more single roommates now have friends, girlfriends coming over nights and weekends, staying over night, or playing card games. So you need half a dozen parking spaces for these visitors and they park their cars in front of peoples homes.

My tenant complained to the owner of the rental house. The owner says the spaces in front of my rental is a public street and anyone can park there. My tenant replied, you're right, but the laws in this town does not allow rooming houses and you run one. My tenant then says, I don't mind you renting to roommates except don't park in front of my house.

They didn't park in front of my rental anymore. And I had rented my SFR to 3 room mates before, but my driveway can park four cars, and being a corner lot, accommodate 5 more. However, my tenant was decent enough not to call the town right away that others might do. But then, my tenant took time and effort to find the owner, but in many cases, that's too time consuming. In your case, how would neighbors file complaints about a rooming house, or know you're the one running it.