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I wanted to write about rental agreements because I have received several direct e-mails asking if I use a rental agreement and if so, can they get a copy?   To be completely honest and this may sound crazy, out of the seven different roommates I had, I only used a rental agreement with only one roommate, which was my first roommate I found online.  Why only the first roommate you may ask?

Naturally, when you try anything for the first time, you feel nervous and seek guidance.  This holds very true when I first rented out my spare room.  I never have done it before nor could I find any really helpful resources on the Internet.   Despite, the lack of useful online resources, all of them seem to have one common theme — have a rental agreement with your roommates.

Following the advice of these online articles, I had a rental agreement between my roommate and I.  The reason why I stopped using a rental agreement was because it was never used. Another words I had no problems.  In addition, I found out that if you and your roommate ever go to court over a breach of agreement, the rental agreement may get thrown out because the State and local laws may take precedence in areas where the terms of the agreement are “unconscionable.”  Another words, there may be State laws that prohibits abusive practices by landlords that unnecessarily reduces a tenant’s standard of living or invade their personal privacy.   For this reason, the rental agreement is nearly a useless piece of paper that serves only as a comfort factor that may or may not hold up in the court of law.

If you also think about it, if you are renting a room out to a person who needs to be constantly reminded about the rules stated in a rental agreement, would really want to be living with that person?  So if you do your due diligence in screening for roommates and find compatible people, I found that you can almost eliminate the rental agreement.  So far with six roommates, I never had a problem over rules of living here without a rental agreement, astonishingly enough, I found that all my roommates are courteous enough to ask before they do something out of the ordinary, but that may be different from situation to situation.

Some of you may think that without a rental agreement you should be renting to friends and I wrote a post here that friends don’t make the best roommates.  From first hand experience, I can tell you reliable roommates do exists online.  The important thing is to trust your gut instincts and not get caught up in how much financial relief the rental income will net you.

If I don’t have a rental agreement, how do I document the rent price or security deposit so that there is no confusion a year or so later when the roommate moves out?

I use replies from e-mails as documentation on the amount of rent and security deposit paid just in case we forget a year later when a roommate moves out.   This acts as a piece of documentation on the rent price and deposit we both concurred through e-mail.  Other than that I do not have a rental agreement on house rules, such as when friends can stay over, who is responsible when something breaks, etc.  I simply state in an e-mail to my roommate that rent is due on such and such day of the month and I have a flat fixed rate as described in this post here that includes all utilities.

If you are thinking about renting out a room, do you agree with my view on the rental agreement?

{ 2 comments }
  • Barbara Woodin September 7, 2014, 3:43 pm

    Just curious why you write that rental agreements are unnecessary if you do proper background, job verification checks, plus interview in person your prospective roommate; yet you are selling a book on Rental agreements. What changed your mind about agreements that you decided to write a book on them. I’m probably going to order the $23. one, but wanted to get your input first.

    Also, from previous email, is the First Time Live-in Landlord a separate download, or is it part of your various very informative blog pages?

    Thanks for a great website!

    Reply
    • Mike September 22, 2014, 8:57 am

      You have a good point that I contradict myself. Some folks are asked whether a rental agreement is necessary. I gave my opinion. Having the rental agreement is the more common way and the preferred way, which is why I sell it.

      Reply

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