Question: I rent out a three-bedroom home with a covered patio that I have turned into a fourth bedroom. There are four individual people renting. My question is, can I call it renting rooms or am I renting a house to four different people?
Answer: It is better if you rent the house to all four under one lease with each tenant being “jointly and severally” liable, meaning they are individually responsible for the lease, as well as collectively.
Ted Kimball
Kimball, Tirey & St. John LLP
Question: We have a policy of allowing prospective tenants who have poor credit to qualify if they have a qualified guarantor sign the lease. We want to change that policy. Do we have to do anything legally speaking to modify our policy?
Answer: Be sure to document the details of the new screening policy in your files, including the business reason for the change in policy and the effective date that it will be implemented. That way, if someone claims they were given different screening criteria than someone else, you have documentation to show there was a good business reason for the policy and when the new policy came into effect.
Question: In order to screen prospective tenants, I want to establish a standard of income/debt vs. rent. Is this legal in California?
Answer: Many landlords use a formula to determine qualification of residents based upon their financial stability. The industry standard is to establish a rent-to-income ratio (for example the combined household income must be at least 2.5 times the monthly rent). Debts are usually included as part of the credit standard rather than the income standard. If you decide to include debt in the income vs. rent ratio, be sure to set clear and objective criteria about the standard and how it will be applied to avoid potential claims of discriminatory treatment.
Kimball, Tirey & St. John LLP is a full service real estate law firm representing residential and commercial property owners and managers. This article is for general information purposes only. Laws may have changed since this article was published. Before acting, be sure to receive legal advice from our office. If you have questions, please contact your local KTS office. For contact information, please visit our website: www.kts-law.com. For past Legal Alerts, Questions & Answers, and Legal Articles, please consult the resource library section of our website.