Should You Choose an Individual or Joint Lease Agreement When Renting out Your Property?

When you are looking to rent out a property that has multiple rooms, you need to decide what type of lease you are going to offer to tenants — an individual lease agreement or a joint lease agreement. Both are very different and each has their own advantages and disadvantages. We’ve put together the information you need to make an informed decision. Here it is!

What is an individual lease?

An individual lease involves tenants signing up to rent by the bedroom, rather than renting the whole property as a single unit. It means that any tenant within the flatshare is only responsible for their own rent and the spaces they have access to — their room and any shared spaces, such as the bathroom, kitchen and lounge.

What are the benefits of an individual lease?

One of the pros of an individual lease is that it allows people who don’t necessarily know one another to share the property as a joint home. This means that individual tenants can come and go more easily. If you have a large property to rent out, for example, one with four or more bedrooms, this becomes a very popular choice. This option means that rent is set for each individual room or tenant, leading to a larger profit. Furthermore, as a landlord, you will have far easier access to the shared spaces, whether that is for inspections or repairs because with an individual lease you have the right to enter.

What are the downsides of an individual lease?

One of the biggest disadvantages of an individual lease is the reduced responsibility of your tenants. Given that the property is not controlled under one tenancy, if an individual tenant defaults on their rent, the overall responsibility for unpaid council tax and utility bills lies with you, rather than the other flatmates.

Another point to consider is that, when renting out rooms separately, you will have control over who occupies the rooms. It is therefore, important to be mindful of the other flatmates, and their routines or expectations. It might be a good idea to involve existing tenants in the process when someone new is going to join the home. This could help to avoid any compatibility issues later down the line when dealing with the issue would be more problematic.

What is a joint lease?

A joint lease involves renting out the property as a whole — the entire apartment or house counts as a single unit. This tends to be the most popular choice when the prospective tenants are unlikely to change during the entire tenancy period. For example, families, a group of friends or students who already know each other. It is also more commonly found in smaller properties with only one or two bedrooms.

What are the benefits of a joint lease?

The biggest advantage of a joint lease for landlords is to do with “joint and several liabilities”. All the tenants must sign the agreement, and they all become equally responsible for both the individual and the shared costs at the property. This means that if one tenant defaults, the other flatmates are liable. They will be responsible for council tax and utility bills, paid directly to the supplier. If somebody decides to move out, it is your tenants’ responsibility to either replace them or cover their share of the rent. When more of the responsibility lies with the tenants, it can make your life a little easier because you can be less involved.

What are the downsides of a joint lease?

Whenever you let out an entire property as a single unit, you are unlikely to be able to demand as much rent, which will reduce your profits. Additionally, it can become a problem for your tenants if one person decides to leave, as it will be up to them to replace them and sign a new agreement for the remainder of the term. Furthermore, because the individuals in the group share responsibility for the deposit, they will need to find a way of returning the leaving tenant’s money. All of these potential stumbling blocks could impact whether they decide to sign up for another term or not.

When deciding whether to choose an individual or joint lease agreement, it really comes down to your own circumstances, needs and wishes: how big the space is that you intend to rent; how important maximising profit is; how involved you would like to be with the tenancy; and how much legal responsibility you are prepared to take on. Take all these points into consideration.

To go further

• Renting the whole property vs. renting the rooms separately
• Keeping tenants in your property hose all-important steps to preventing high turnover
• Landlords’ rights when selling property in the middle of the tenancy contract