3 Tenants, One Unit. One Lease or Three Leases?

6 Replies

I asked this in another forum (in an admittedly long and rambling post), and did not get an answer to this specific question. The space in question is one of 5 units in a light industrial building. Three people want to share the unit. Is this one lease that all three of them sign, or three leases, one for each of them.

If one of the three does not pay, then what? How does one manage a shared rental? Making this a little more messy, is that the person asking setting up this arrangement is a family member who has been able to use the space rent-free for several years. Now the space is being readied for rent, and they would like to continue using the space. They cannot afford the rent on their own, so they are looking at sharing the space.

Any advice on this? 

I would write it as one lease. You could either have it signed by all three people using the space, or signed by the family member and allow him to sublease to the other two people. This way you don't run into a situation where 2 of the three pay, then you're stuck figuring out how to handle that.

In my experience with multi-tenant leases for a single unit, one thing we have verified is that each individual tenant could carry the lease themselves if need be financially. So you could sign a single lease where all tenants are responsible for the lease payments, and let them divvy up the share of the burdens of the lease agreement. 

By ensuring that each tenant member is capable of covering the lease by them selves, you are at less chance of risk of non-payment, should things go sideways. 

As always in any situation with a tenant, it is best to build rapport with them and have an open door so if financial troubles were to appear, you are on the short list of notification of such events, and work with them towards a situation that makes everyone as whole as possible.

Originally posted by @Jennifer Hicks :

In my experience with multi-tenant leases for a single unit, one thing we have verified is that each individual tenant could carry the lease themselves if need be financially. So you could sign a single lease where all tenants are responsible for the lease payments, and let them divvy up the share of the burdens of the lease agreement. 

By ensuring that each tenant member is capable of covering the lease by them selves, you are at less chance of risk of non-payment, should things go sideways. 

As always in any situation with a tenant, it is best to build rapport with them and have an open door so if financial troubles were to appear, you are on the short list of notification of such events, and work with them towards a situation that makes everyone as whole as possible.

What she said

You are contemplating entering into a very high risk lease situation. In a situation where each one can not afford the entire rent on their own when one can not pay you will no longer likely be receiving any rent.

If you are going forward with this, which is highly unadvisable (especially with family), I would screen each and if none can afford the unit alone then reject all applicants. If one can pay the full amount have only that one on the lease and hold them fully responsible for the entire rent. Allow him to sublet to the other two but demand a single rent payment check from only the individual on your lease. If he defaults you take him to court for payment.

With luck they will decide not to rent from you. Never a good idea to rent to anyone, let alone family, that can not afford the rent.

I've had three on a lease and done it without issue.  I just make them send me one payment so I don't get it from each of them separately.  I'm not sure I would say it is high risk unless you are dealing with young kids that will be partying all the time.  My people are IT professionals that do not want to buy a place and are too cheap to get their own place.  

I'm not sure how big the property is but it might be a bit much depending on the size of your units.  I did it with a 6BR 3BA house.

It's 2150 sq ft (50ft x 43ft), bathroom with shower. Interior has a walled and lockable 14'x12' office, large overhead door.

Main driver of this proposal wants to continue using the space, and feels somewhat entitled due to them having performed some infrequent light building maintenance and lawn mowing over the years. They sometimes overlook the free use of the space with no utility charges for at least the past 5 years when calculating their justification.

My self-employed parents own the building, it is the source of their retirement income. Their 3 kids and spouses have pitched in to help them maintain the property. It is one of those spouses who wants to lease the space with help from one or two other people. None of the potential tenants would pass Jennifer's test. It would have to be an arrangement as James has done.

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