The Chief Economist for Redfin predicts that rising prices, an uptick in rates, and higher property taxes will lead to more roommate arrangements due to a lack of affordability. Real estate startups like Nesterly and CoBuy have rode the wave of non-traditional home-buying and cohabitation by fostering technology to play matchmaker between housemates, some of whom are odd bedfellows. Read all of Redfin’s predictions in this report.

Given the necessity for many tenants in the Bay Area to find roommates to absorb some of the highest housing costs in the nation, landlords and real estate professionals should be aware of the law surrounding roommates.

In earlier posts on Airbnb and other subletting arrangements, we advised rental property owners they need to know who is occupying their premises. Some personal sleuthing may be advisable, to ascertain what is going on in your units.

In many cases, roommates can’t co-exist and this leads to a revolving door of swapping roommates, creating confusion as to who is responsible for what, when rent can be raised, and how to legally evict tenants/occupants. The stakes are particularly high and the subject matter more complex in rent controlled jurisdictions. First, let’s define a couple terms.

In California, roommate arrangements can be boiled down to two types of arrangements when the landlord does not live in the rental unit.

  1. Roommates as Co-Tenants: A co-tenant arrangement occurs when all roommates have a contractual relationship with the landlord. Both co-tenants directly and individually pay rent to the landlord.
  2. 2. Roommate as Subtenant: Subletting means that one tenant has a contractual arrangement with the landlord, hence the primary tenant is referred to as the “Master tenant”. After entering into a binding agreement with the landlord, the master tenant contracts with another person, a roommate or housemate called the Subtenant, who is responsible for paying rent to the master tenant. The master tenant retains all rights and obligations under the “master” lease, which includes, naturally, paying rent to the landlord.

Co-tenants cannot be evicted without “just cause”, meaning they can be evicted only for certain reasons, such as non-payment of rent or other violations of the lease terms. A co-tenant can, however, evict a subtenant. A subtenant is impotent and cannot evict anyone, while a landlord can evict all tenants from the premises, with caveats.

While the subtenant has no direct relationship with the landlord (the master tenant is essentially the subtenant’s landlord), we must caution that you can inadvertently establish a relationship with the subtenant by taking rent money. In other words, roommates who initially occupied your rental unit as a subtenant may be catapulted to the status of a co-tenant by your acceptance of rent, even if they are not named in the lease. This is a cardinal sin we see all too often at Bornstein Law.

Another unexpected and harrowing surprise landlords can face is a long-term guest that becomes a tenant because they stayed in the rental unit for 30 days or more, regardless if they entered into any formal tenancy agreement. Don’t wear blinders — if there is a guest that is staying in a unit for any prolonged period, you have a new tenant under the law, and if they do not leave on their own accord, they are entitled to due process when they are no longer welcome, meaning the guest-turned-tenant needs to be provided written notice to vacate.

Assignment of the lease

An assignment is an agreement to transfer the lease. It encompasses the transfer of rights held by one party — the assignor — to another party — the assignee. A common example is when a property is sold and the landlord assigns the lease to the new owner. In similar fashion, a tenant might assign his or her lease to a new tenant or occupant, which then begins the game of musical chairs and creates a quagmire where the rental property owner does not know who is living in their units.

Fortunately, a properly written lease may prohibit or restrict assignment, subletting and other changes in occupancy. If there is no written lease, or if the lease does not adequately address these issues, you have a problem that needs to be rectified with the guidance of a real estate attorney.

As shifting demographics and alternative living arrangements become the norm, there will be many blurred legal relationships between multiple parties, but Bornstein Law can provide clarity and restore order in Housing 2.0.

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