Joint or individual contracts for tenants in HMO's
A member asked what the pro's and con's of joint contracts were compared to individual contracts when you have multiple tenants in one property, this is what we came up with....
- A joint contract for all inhabitants works when you let a house to a group of people who collectively take on responsibility for the house whereas, if you let to individuals who do not know each other individual contracts make more sense
- Most landlords ignore this distinction and always use one type or the other (We have instances of both among the student landlords on the PDPLA committee).
- If everyone is on the same contract, they are all responsible for each other"s rent, so if one does not pay you can theoretically ask the others to pay
- With individual contracts it is easier to highlight that each person is specifically responsible for their room and jointly responsible for the communal areas, conversely with a joint contract you can hold everyone liable for everything
- From a Council Tax (CT) perspective, a joint contract can be better, as when Council Tax falls due the council will go after the landlord if there are individual contracts whilst they will chase the tenants if they are all on one contract. This is good after the tenants have left as it means you probably won"t have to pay but during the tenancy, it does not make much difference as long as you make responsibility for CT clear in the contract.
- Conversely, the Uni ask landlords not to use joint contracts as it puts an unnecessary burden on individual students, making them liable for damage done by their housemates or arrears of their housemates. In reality, it makes little difference whichever contract you use, you should make clear to tenants that they are liable for any damage in their own room, their own rent and a share of any damage in the communal areas.
- One final benefit of individual contracts is that you can choose who lives in the house, whereas with 4 people on one contract if one leaves and those in the house move someone else in it can be harder to control who or how many people are in the house on a joint contract
Do you agree with these points? Is there anything we missed? What else should be considered? Please let us know at