When it comes to renting out properties, it is best to know all the possible aspects related to it. There are many factors to consider in marketing, your target tenants, your lease agreement, and the overall management of the property.

Marketing may be the easiest among those four things. I mean, if you’re using Padleads to create your property listing and also using it to syndicate that listing to other rental websites, then more clients would see it. 

Tenant screening and managing the property, however, require more work. You have to do background checks of your applicants for you to acquire responsible tenants. There are inspections, maintenance, and repairs to be done. But one of the most crucial tools that could make or break your business is your lease agreement.

Composing a lease agreement can be a tough job and you should know the basic terms in renting to make an accurate contract. And by “accurate,” I mean using the appropriate terms to avoid confusion.

Let’s narrow down the subject a bit more. I’ve come across the term “co-tenant” and some may confuse it with a sublet or roommate. Those terms are different from one another.

Does it matter which word I use? Yes, it does. Let me tell you why.

A co-tenant is the second person living in the same unit as your tenant. This person is included in the contract. They also have to follow the rules stipulated on the lease and they will also be paying rent.

For example, two friends who recently graduated and moved to your area for work. Ideally, they would want to live together and share the cost of rent to be practical.

So they’re roommates? Well, yes and no. I’ll get to that in a while.

Co-tenants should not be mistaken as sub-tenants. Remember that there are landlords who will not allow a tenant to sublet.

Subletting is when your main tenant rents out his spare room. The tenant who occupies that room is called a sub-tenant. These people have a contract with the main tenant and not with you. You will not have control over them and they do not have to follow your rules. This is a bit risky and that is why some landlords do not allow it.

The term roommate is broad and can be used for both co-tenants and sub-tenants. However, these two cannot be interchanged. This is what I mean by using an accurate term on your lease agreement.

You might be more agreeable to having a co-tenant who will be under your contract than to have a sub-tenant whom you have no control over.

How does having a co-tenant work?

It’s not any different from renting to a single tenant. This means:

• Both tenants pay the rent and the division will depend on their arrangement. Commonly, they split the cost 50/50.
• Both tenants will sign a lease agreement, whether separate or joint.
• Both tenants will split the utility bills between them and this will also depend on their arrangement.
• Both tenants will have to follow the agreed-upon rules stated in the contract.

What will happen if one of them fails to pay?

This is a drawback to having co-tenants. A co-tenant who is unable to pay will have to rely on the other tenant. One of them will be a guarantor if they signed a joint lease agreement. This means that if one of them is not able to pay their part of the rent, you will have to ask the other co-tenants for the payment.

Are separate contracts better than joint ones?

Having co-tenants sign separate contracts can become a problem for the landlord when one of them fails to follow the terms stipulated. If you have to evict one tenant, you will not be able to ask for the full payment from the remaining tenant. They might not also agree on filling up the vacancy with a stranger. If this concerns you, a joint lease agreement would be your better option.

Like every decision you have to make, it is best to weigh the pros and cons first. You should know the possible consequences of having co-tenants and sub-tenants. If you think you can manage it, then feel free to give it a go.