WHO ARE THESE GUYS?  Part Two

© Copyright 2002-2014 Landlord.com

Even the most chaotic landlord-tenant-subtenant arrangements will work fine as long as there is plenty of money to go around and no one is setting off smudge pots in the common areas of the building.  Problems of characterization typically arise when something goes wrong and the landlord must liquidate the resultant problem.

            As a first principle, the landlord should always reduce his agreements with anyone even remotely touching upon his property to writing.  Since we live in the USA, the landlord is free to permit subletting and assignment as he wishes, and many do permit them.  But the wise landlord will include the terms and conditions under which he will permit such arrangements in his written agreement with the tenant, and then enforce these conditions.  In addition, any assignment or sublet arrangement will be fully covered in a writing signed and agreed to by all parties.

            One might think that a cotenancy situation is always to be preferred to assignment or subletting.  Indeed, creating a cotenancy has some very real advantages.  For example, all cotenants are responsible for all the rent due, which is not the case for subtenants.  By having a direct contractual relationship with the new occupant, an overlay of complexity is removed from eviction proceedings, should these become necessary.

            But there may be disadvantages to making a proposed subtenant a cotenant.  If you live in a rent control jurisdiction, the rent ordinance may permit a one time "vacancy decontrol" rent increase when the original tenants are all gone.  This may not be so if you make proposed subtenants into cotenants (discuss this with an experienced legal practitioner in your area if rent control applies to you).  You may wish to lease a multi-unit building to a master tenant and have him sublet the units he is not living in to subtenants.  This allows you to deal with only one tenant, rather than several.  Maybe the proposed master tenant is a good tenant and you want to permit him to have the option to evict the subtenant if there are problems, which is something he probably will not be able to do in a cotenancy situation.  There can be many reasons to permit a subtenancy.  Just make sure it is all in writing.

            If you have a cotenancy, then you have at least these advantages:

            a.            All your cotenants owe you 100% performance of all the terms of the rental agreement, including the payment of rent.  If you serve a three-day notice to pay or vacate, one of two cotenants cannot redeem his tenancy by paying "his half" of the rent.  He must pay it all.  Similarly a breach of another term of the agreement is a breach by all.  In law, this type of obligation is called "joint and several."  All cotenants owe it collectively, and may divide up the obligation for performance as they see fit among themselves.  But, as far as the landlord is concerned, each cotenant owes performance individually, and each may be made to perform it in full, although any given obligation need only be discharged once.

            b.            In many states, since the cotenants occupy the property and hold the lease as "partners," service of notices on one constitutes service on all, simplifying notice requirements.  This is definitely true in the case of cotenants that are all signatories to a written lease.  It is generally interpreted as being true, due to the nature of the judicial reasoning that led to the rule, for oral agreements as well.

            The subtenant places the landlord in a different position.  The subtenant owes no duty under contract to the landlord, although an action by the subtenant contrary to the master lease is deemed a breach of that lease.  If the rent is not paid, the subtenant is under no obligation to pay it, although in most states, including California, he has a right to pay it to redeem the master tenant's tenancy if a notice of termination for non-payment is served.  The subtenant is entitled to service of a copy of any notice of default that is served on the master tenant so he can exercise this right.  Better still, the landlord should consider naming the subtenant on the notice of default, and characterizing him as "Joe Blow, subtenant of Jim Jones."  He has the right to appear as a party in any eviction proceeding, and to be heard, although there is little he can say in the matter.  The judgment in the eviction proceeding may not hold him responsible for unpaid rent, although he can be charged with the rental value of the premises for any period he has held over after the notice to vacate has expired, plus court costs.

            If you decide on permitting a subtenancy (we are assuming you took our advice and have a written contract giving you some say in the matter) you should definitely give a written consent, agreed to by the subtenant, setting ground rules for providing notices, limiting his right to sub-sublease, agreeing to an assignment of rent if the master tenant defaults, making him a guarantor of the master tenant's rent if the master tenant should default (if you can get this agreement, which is doubtful), etc.  You should also provide him with a true copy of the master lease, and make him sign a receipt for it (but don't have him sign it, otherwise he will become a cotenant, which you have decided not to do).

            The assignment also requires circumspection and ample writings covering all parties.  Do not rely on the assignor's common law guarantee of performance.  Put it in writing, and use a form, such as the one which we provide.  Guarantee can be complicated.  For example, did you know that a person guaranteeing to hold you harmless against "liability and loss" undertakes a very different obligation from one who agrees to hold you harmless against "liability or loss?"  Ensure that the original lease agreement with all addenda and side agreements and exhibits is an integral part of the assignment agreement between the assignee and assignor, and also of your consent form.

            In the event you go ahead to evict, your proceeding will be against the assignee, not the assignor.  Recovery of losses against the assignor usually must be in a separate action.

            The unauthorized occupant is an accident and really cannot be guarded against.  Assuming reasonable care is taken to assert control over the rental unit, such a person may still insinuate himself into the unit.  If this happens the only thing to do is to get him out.  Never, ever, take money from such a person, or agree to rent to him.  If he were acceptable as a tenant, he would not have had to sneak into your property.

            First, try the police.  This is usually not effective, but costs nothing, and does put you on record as not having agreed to the trespasser's occupancy.  If an officer is sent at all, he may question the occupant briefly to ascertain there is no agreement to occupy.  If the occupant says there is, he will usually go no further, although a sympathetic officer who believes him to be lying may say something like "be out of here when I come back in two hours.

            If this does not work, all states have summary judicial proceedings for effecting the unauthorized occupant's removal.  In California this type of proceeding is called a Forcible Detainer.  It is different from an Unlawful Detainer, which presupposes a landlord-tenant relationship between the parties.

            Now you have enough information to decide what the capacity of those people occupying your rental unit is.  Armed with this, you can use the information in this article to assist you in drafting appropriate agreements, directing your correspondence, and generally transacting the business of landlording with them.  This information will also assist you in applying the more specific suggestions and advice which are offered in our other articles dealing with lease drafting, rent collection, debt collection, eviction, etc.

FREQUENTLY ASKED QUESTIONS:

FAQ#1:  Wait a minute.  My tenant let his girlfriend move in to his apartment without my permission.  I did not authorize it.  Why is she not an unauthorized occupant?

RESPONSE:  You can call her that if you want, but it will only lead to confusion.  "Unauthorized occupant" as we have used that term above implies someone who has no legal right to occupy the apartment at all.  The key to your situation is where you say "let his girlfriend move in."  This is an agreement.  It may not be in writing, it may not even have been expressed, although it probably was, but it is an agreement nevertheless.  Because there is no agreement between you and her, but only between her and your tenant, she is a subtenant.  You may place "unauthorized" before "subtenant" if it makes you feel better, but it does not change her status.

RESOLUTIONS:  There are several things you might want to do.

1.         Do nothing.  While you are waiting, you might as well order a coffin, you will have need of it.

2.         Take the initiative and go to the tenant to formalize the arrangement.  In nearly every case, you are much better off making her a cotenant.  Approach the tenant and subtenant before the next rent installment is due and under no circumstances take rent while she is there and before the matter is resolved to your satisfaction.  Your objective is to get her on the original rental agreement as a cotenant so her obligations are to you and not her boyfriend.  You may also want to negotiate a rent increase to cover the surcharge to the occupancy of the premises.  A new written agreement is the cleanest resolution along this line, but there may be reasons to retain the old one in effect, and add her to it.

3.         If you do not want to add her to the rental agreement, or could not come to a satisfactory resolution in that regard, then you must act immediately to enforce your legal rights.  Accept no rent.  Step one might be to send a demand letter addressed to the original tenant demanding that he remove his subtenant.  Do not give them beyond the next rent due date to resolve the problem and address nothing to her.  You do not want to take any chance that some sort of implied tenancy with her is created.  If the letter does not work, then give a notice terminating tenancy for an unauthorized subletting.  Note well, in most jurisdictions you can only evict a tenant for violating an express agreement that is in writing.  If you have an oral agreement with your original tenant, you cannot evict him for having his girlfriend there.  This is the rule in California, check for other states.

FAQ#2:  My tenant moved out in the middle of the night, leaving his subtenant there.  The subtenant started to pay rent directly to me, which I accepted.  Now he is not paying.  What do I do?

RESPONSE:  Under our definitions, the subtenant became your tenant when he started paying rent directly to you while he was occupying the property.  He is now your tenant.  The contract is an implied agreement to pay rent at the rate that he paid you, on a month to month, or week to week, or even day to day basis, depending on the period for which the rent was paid.

RESOLUTION:  This is a bad situation getting worse and you have no alternative to eviction.  You would deal with him as if he were your original tenant, the rental period and rate is whatever your actual practice with him was.  Your remedy against the original tenant, whom you never released, will depend on whether you can find him.  If you can, you will probably have to bring a separate action in small claims court.