September 2008

Keep Spouses Off of the Lease

 

Q:  Our tenant just asked if she could add her new husband to the lease.  Can we deny her request?

Yes, and you absolutely should deny this request.  Adding someone to a lease agreement may make the new person a co-tenant.  Under a state law known as the Costa-Hawkins Rental Housing Act, rent can be re-set beyond rent control limitations when the last original occupant who occupied a unit pursuant to a rental agreement with the owner no longer permanently resides there.  In other words, if the wife is the only person on the lease and moved into the unit before living with husband, and several years down the road wife vacates leaving husband behind, the landlord can raise rent without regard to the local rent control limitations by invoking Costa-Hawkins.

However, if the landlord placed husband on the lease when he moved in, husband could successfully argue that he is a co-tenant as opposed to wife’s subtenant, and thereby defeat the owner’s attempt to raise rent in the event wife leaves.  For this same reason, landlords should be careful about accepting rent checks from subsequent tenants, although oftentimes wife and husband will submit a check from a joint checking account.  (In such a circumstance, the owner may accept the joint check; incidentally, do not accept two checks, one from each spouse, for their respective portion of the rent.)  Some landlords worry that a failure to put husband onto the lease means that he will not be bound to the rules of the rental agreement.  Yet state law essentially binds husband, as a subtenant, to the terms of the master lease agreement in so far as if he, or wife, breaches the lease, the entire tenancy, including the husband’s sub tenancy, is forfeited.  As such, there is no appreciable harm in keeping husband off of the lease.

Costa-Hawkins states that an acceptance of rent by the owner will not waive a landlord’s right to establish new rent when the last original tenant leaves unless the owner has received written notice from the last original tenant that she is leaving and thereafter accepted rent from the subsequent occupant.  The Rent Board, following a line of court cases, has expanded this “waiver argument” to include instances where the landlord recognizes, through actions, a subsequent tenant as a co-tenant; for example, waiver may occur if the landlord accepts rent directly from the subsequent occupant, negotiates rent increases with him, and/or corresponds directly with him about matters related to the tenancy.  If such direct acknowledgment occurs, husband could successfully argue that he has become a co-tenant even though he did not sign the rental agreement.

Therefore, it is imperative that owners ignore subtenants.  They should not be added to a rental agreement.  They should not be required to submit applications or to sign subtenant agreements.  Rent should not be accepted from the subtenant.  Most importantly, when the last remaining original tenant vacates, a rent increase notice, and, if desired, a new rental agreement, should promptly be issued by the landlord and served on the subtenant, who then becomes the master tenant with a new “at market” base rent.

 

--Dave Wasserman