Renting to full time students
We provide here a few questions that have been posted in the Community Forums and our answers to them.
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Q1
I have 3 full-time student applicants for my rental property. They currently have no jobs but parents are co-signing for them. Question: Do I have to have co-signers sign the rental agreement as well? I am thinking I should but I am not really sure about it.
A1
What the parents should sign depends on what status you wish them to have. That is, do you want them to be co-tenants, with all the rights associated with tenancy, or do you want them to only guarantee the lease. If they become co-tenants, you would have to evict both the students and the parents and there are potential significant disadvantages to having to do this. Whether titled “co-signer agreement” or “guaranty agreement” is not important. What is important is what the agreement says.
There are a number of issues important to an adequate guaranty agreement, including that (1) it is clear the co-signers/guarantors are not being given any tenancy rights, (2) the co-signers/guarantors are made responsible for all financial aspects of the lease including both rents and damages, (3) it allows the landlord to proceed for collection directly from the co-signers/guarantors without pursuing the tenants, (4) both husband and wife of a married couple be required to execute the guarantee, and (5) when co-signers/guarantors are not able to appear in person to prove identity, their signatures be notarized. I always used a separate guaranty document, but the guaranty could be within the lease agreement as long as it is properly worded.
You should consider consulting a competent landlord-tenant law attorney for your state the first time, so that you have an adequate agreement that is fully consistent with the laws of your specific state.
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Q2
I recently purchased a house and when I put my “for rent” sign in the yard was quickly called by the HOA informing me that rentals are not allowed by the HOA. I checked and sure enough there is a declaration in their bylaws that describes the ban on rental property. Is this legal? Any ideas on what I can do about this? I will be calling a lawyer tomorrow for his opinion, but I was wondering if anybody else has had this problem.
A2
The basic framework of an association is set up through the CC&Rs and the Bylaws. These documents usually give the board the authority to draft, implement, and enforce any other rules that will preserve the values of the units, enhance the quality of life for residents of the community, or improve their convenience or safety.
Even though owners may think that such restrictions are overly dictatorial, courts have, in general, upheld them because the CC&Rs and Bylaws were agreed to when the unit was purchased.
If buying a property that is governed by an association, one must always be sure to make approval of various association documents a contingency. This should include the CC&Rs, Bylaws, the Rules & Regulations, the current Annual Budget, and other financial information, as well as disclosures regarding any pending or expected litigation.
Some states have laws that require that certain information (typically including the items listed above) be provided to a buyer even if not required by the purchase contract. These states would also likely make real estate agents responsible for ensuring that buyers are provided such information. This may be an area where you have some recourse.
If you were not provided information required by law you might have recourse against the seller, the escrow agent, or the association. If there was one or more real estate agents involved who did not meet his/her responsibilities, you may have some recourse against an agent.
If you were provided the opportunity to read the CC&Rs and Bylaws prior to purchasing the property, then your only option might be to live in it yourself or sell it.
The reason associations prohibit rentals is that there is a general belief that tenants do not behave as well as owner-occupants and that landlords do not maintain properties as well as owner-occupants, resulting in potential lowering of values for properties within the community. Many lenders believe this to be so and have limits on the percentage of rentals within a community where they will make loans. Loans insured by FHA and VA will have such requirements.
While you should certainly be consulting an attorney, one who is knowledgeable and experienced about your specific problem, you should also do your own research ahead of time. The real estate department or commission in your state should be able to provide information regarding the issues on its official Web site and/or via telephone.
There should also be a local real estate broker or property manager who knows what courts have had to say about the legality of a rental prohibition by an association in your state if there has been such a case.
One other thing that might be of value is to determine whether any other owner is renting a property in the community with or without knowledge of the association. The failure of the association to previously enforce the restriction against owners might prohibit them from enforcing it against you.
Again, you should consult an attorney, but the above should give you some things to research and to discuss with the attorney.
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Q3
What happens if the tenant refuses to move out after being given a thirty day notice? I am on a month-to-month lease with the tenant.
A3
It depends a lot on the laws of the particular state as well as on other issues.
First, the landlord must have given notice in accordance with the law of his/her state. This means at least the minimum time required (30 days in most states, but it varies) and “legal” service of the notice.
Second, the landlord should not accept rent for any period beyond the effective termination date. Doing so will extend tenancy another 30 days in most states. This means that rent for the final month should not be collected in most states if the tenant had paid a last month’s rent instead of or in addition to a security deposit.
Third, if the tenant fails to leave, start the eviction procedure. The tenant will be liable for the rent until they do leave.
Finally, the landlord must be sure to return the security deposit and/or provide a detailed accounting for any part of the deposit not being returned within the period required by your state’s law. Many states have serious penalties for failing to do so.
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Additional Information
Most of the issues discussed in these Q&A’s are covered in considerably more detail in our eCourses and/or in our Mini Training Guides.
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