Ask Lucas 023: Should I Add an Unqualified Applicant to an Existing Lease?
Lindsey from Iowa asks about adding a very, very unqualified roommate to an existing lease. What are her options and what would I do in this situation?
Lucas: Hey, everyone. Welcome to the 23rd episode of Ask Lucas. I’m Lucas Hall from Landlordology and Cozy, and this is a bite-sized Q&A show where I answer your questions about landlording and property management. If you have a question, just leave a recorded message on asklucas.com, or call us and leave us a voicemail and I’ll try to answer it on the show.
Today’s question is from Lindsey in Iowa and she is asking about adding a very, very unqualified roommate to an existing lease. Lindsey used Cozy, and so should you. But what is it, right? Cozy is an online tool that helps landlords and property managers screen tenants and collect rent online. It’s super easy to use, and it’s completely free for landlords and managers. There’s no other product out there that does that.
I’ve been ordering credit reports for the last 10 years on applicants, and the credit reports that Cozy delivers are by far the prettiest and most complete that I’ve ever seen. In fact, just last month because of Cozy, I was able to catch an applicant who had lied about a previous bankruptcy. It probably saved me months, I would say. Months of late rent, vacancy, and a lot of stress because I probably would’ve had to evict that tenant.
If you want to save time, a lot of money, and countless headaches, try automating your rental business with Cozy. Do what I do. Again, it’s completely free. Sign up at cozy.co. That’s C-O-Z-Y dot C-O.
Alright. I’m excited to welcome Lindsey to the show.
Lindsey: Hi, this is Lindsey. I’m a landlord from Des Moines. My question is regarding adding a roommate to a current lease agreement. We just started our first rental property early in August and our two tenants would like to have a third tenant join them. My concern is that after this tenant filled out the application, did the credit and background checks on Cozy, she’s less than desirable as far as minimal rental history, terrible credit score of less than 590, two small accounts are in collections that are less than $500 each, and she just recently her own hair salon.
If we were looking at her as a single candidate, we absolutely would not extend her a rental offer, but how would you proceed in our current situation? Do we discuss her shortfalls with her and leave it at that, or say no she cannot live there, or do we discuss then request confirmation of understanding from the group as a whole that their lease is joint and several and they will all be held accountable for the full monthly rent, regardless of if she is able to pay or not.
We’re still learning as we go, so we would appreciate any input you can give. Thanks.
Lucas: Hey, Lindsey. Thanks for the question. Thanks for calling in, and congratulations on getting your first rental property up and running. That’s super exciting. I know that when I was first getting started, I felt really unsure during that first couple lease periods because I didn’t know what I was doing. I felt like I was trying to learn as fast as I could, but it wasn’t fast enough. But it does sound like you’re asking all the right questions and you’re taking the right steps. I want to encourage you there. Keep going strong, because I’m sure you’ll be fine.
To try to answer your question, it does sound like you have a really, really bad tenant, or should say applicant on your hands and you’re trying to decide what to do with her. To recap, you have two existing tenants and they want to have a third roommate, probably to help with the rent, and she may or may not be a friend of theirs already but it doesn’t really matter either way. She has a very horrible credit score. I think you said it was 590, and 590 is not great and the majority of America has a better credit score. I would guess that her bad credit is probably due to the two items that are in collections right now. By the fact that she has a 590 means that they’ve probably been in collections for a while or she’s had other issues besides those two, so they’re not recent issues that just popped up. It sounds like she has a history of not really being responsible financially.
I think the fact that she has two $500 items in collections means one of two things. She’s either just kind of lazy with her finances or she’s defiant in some way. I think anybody could probably come up with $1000 if they had a yard sale or they sold some furniture or they borrowed it from a family member. It’s really not that huge amount of money, but the fact that it’s gone to collections is kind of worrisome.
Anyway, with that said, it doesn’t really matter. I’ll say it again. It doesn’t really matter what her financial situation is. You do want to make sure that she’s not a recurring criminal or just got out of jail for some grossly violent crime or even the fact that she’s had past evictions because that could be an issue later. From a financial standpoint, it doesn’t matter. She is jointly and severally liable for the entire lease with the other two roommates.
What that means is that it’s like the Three Musketeers. It’s all for one, one for all. She is responsible. The other roommates are responsible. If one of them falls short, if she decides she just doesn’t want to pay anymore, the other two roommates have to pick up the deficiency and they still have to pay the full amount of rent. It doesn’t matter that she didn’t contribute her portion.
I would have a conversation with her and just ask about some of the issues that you found on the screening report, see if her story matches up with what you see on the reports. If there’s a couple bankruptcies there and she says she’s never had a bankruptcy, then either she’s lying or the report’s wrong. Chances are, the report’s not wrong.
I would also tell her, just point-blank, that you’re going to have to have a conversation with the other two roommates to let them know that you would not have qualified her independently. However, because of the joint and several liability on the lease that they are still responsible for her nonpayment of rent just in the same way that they would’ve been responsible for each other if one of the two existing roommates didn’t pay rent, and that they are taking on that liability in order to have you.
As long as they’re okay with that, then I would just create an addendum to the lease and I would say, “We’re going to add you and it’s going to be under the same terms and conditions that they were under.” A simple addendum is a one-page document with the names of the current tenants, a reference to the existing lease by date, reference exactly what those dates were and that you can cite it, and then say what you’re changing about that lease. In this case, it would be to add that third roommate.
You would then add that third roommate by name on that document and have everybody sign it. As soon as it’s signed, then it’s a ratified contract and she can move in. You just carry on like normal. You can accept rent from her if you’d like or you could still collect it from the other two through Cozy. However you want to do it, that’s up to you. The fact is that they’re now considered one entity. As long as the other roommates are okay with her bad financial choices, I wouldn’t care either as their landlord.
Hope that helps. Good luck to you. I know that you’re going to be a success and keep me posted. Thanks.