QUESTION: I am hoping to move out of my parents' home and find my own place. While looking for an apartment, I was offered the choice of a month-to-month rental agreement or a lease. Can you explain what that means and how the two differ?
ANSWER: There are two types of rental arrangements between landlords and tenants: periodic rental agreements and leases.
Periodic rental agreements are defined by the length of time between rent payments. The most common are month-to-month tenancies under which rent is paid every 30 days. This type of tenancy continues indefinitely until either the landlord or tenant terminates it with a written notice equal to the length of time between rent payments, usually 30 days.
A lease specifies a tenancy's fixed period of time of the tenancy--usually six months or one year, although it can be shorter or longer. At the end of the lease, the tenancy terminates unless you and the landlord decide to continue it.
The landlord may offer to renew the lease for a new time period or change the tenancy to a month-to-month arrangement and continue to collect rent every month.
There are advantages and disadvantages to each type of rental arrangement, and the choice, if you are given one, should depend on your needs.
A month-to-month tenancy is more flexible, giving you the option to leave with just 30 days' advance notice. However, the landlord can also terminate your tenancy at any time with just one month notice and, except in cities with rent control, no reason for termination is required.
A landlord can also change the terms of the agreement, such as raising rent or adding a no-pet clause, with 30 days' advance written notice.
A lease fixes the terms of the agreement for a specific duration. This means that a landlord can't raise rent or change other terms of the tenancy without your approval or until the lease period expires, unless the power to do so is spelled out in the lease.
A landlord also cannot terminate your tenancy during the lease period without good cause, such as your breaking a term of the rental contract. You may welcome such restrictions, but keep in mind that you are also making a commitment to stay and pay rent for the duration of the lease.
Whether you choose a month-to-month rental agreement or a lease, put all terms of the contract in writing.
Spell Out Terms, Then Take Holding Deposit
Q: I own several rental properties and have not asked prospective tenants for a holding deposit. A colleague has advised that I should start asking for such a deposit. What do you advise?
A: A holding deposit is legal and is often required by landlords. The idea of such a deposit is to hold a rental unit pending the result of a credit check and until the prospective tenant can come up with enough money to cover the first month's rent and security deposit.
It can also be used to take the unit off the market for an individual who cannot take occupancy immediately. If the applicant is accepted, the holding deposit can be returned or applied to the rent or deposit.
However, such a deposit can lead to misunderstandings. The law is unclear about what portion of a holding deposit a landlord can keep if a prospective tenant decides not to rent or cannot come up with the remaining rent and deposit money.
The basic rule is that you can retain an amount that reimburses you for your loss of potential rent that you otherwise might have received; calculating this amount involves some guessing. An owner who retains more is said to be imposing an unlawful penalty.
Despite our reservations, if you decide to ask for a holding deposit, be sure that both you and the prospective tenant understand how the deposit is to be used. The best way to accomplish this is to provide a receipt for the holding deposit that spells out the amount of deposit, the dates you will hold the property vacant, the costs and terms of the rental agreement or lease and the conditions for refunding the deposit.
Landlord Decides How Roommates Are Added
Q: I own a small apartment building close to a university. Many of my tenants are students who are now asking if they can bring in roommates to help with the rent. The current tenants have month-to-month agreements. I've agreed to allow roommates, but I don't know what paperwork I should prepare. I want to accept only one check per apartment. Any suggestions?
A: You have two choices. You can either have a single rental agreement for your current or primary tenant, who then sublets to the roommates, or you can have individual rental agreements for each occupant.
If you choose to have a single agreement, then your primary tenant would control the tenancies of each roommate. That is, he or she has a separate agreement with each roommate that defines payment of rent, deposits and house rules.
The primary tenant pays you the full rent and is reimbursed by each roommate according to their personal share of the rent. As these roommates move in or out, the primary tenant handles landlord duties such as proper notices and distribution of deposits.
This approach saves you from having to deal with multiple tenants in the unit; however, you lack control over who is residing in your property. To avoid this problem, you could require the primary tenant to rent only to applicants who meet your standards and of whom you approve. You should also require that the primary tenant obtain and provide you with completed application forms for all the subtenants.
Another method would be to have individual agreements with each person residing in your property. This creates a separate tenancy for each roommate and gives you full control of all aspects of each tenancy, such as deposits, rent payment and house rules.
You can create rental agreements that make each tenant responsible for the full rent even if the other tenants move out. These agreements should list the full rent and contain an addendum stating that you'll accept only one check for the rent payment.
This will keep you out of the middle of determining how much each tenant pays for his or her portion of the rent. Whenever you rent a single unit to two or more tenants, you do not have to return or account for the deposit until all the tenants leave the unit.
Any question about a departing tenant's entitlement to any share of the deposit should be worked out among the remaining tenants. If the departing tenant is entitled to a deposit return, the new tenant pays that amount to the departing tenant.
This column is prepared by Project Sentinel, a rental housing mediation service in Sunnyvale, Calif. Questions may be sent to 1055 Sunnyvale-Saratoga Road, Suite 3, Sunnyvale, CA 94087 but cannot be answered individually.
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