Financial Liabilities for Leasing an Apartment
Financial Liabilities for Leasing an Apartment
Leasing an apartment is a major financial decision. Even though you’re not purchasing your home, you’ll be making a long-term commitment. And since housing is the biggest line item in the budget for the vast majority of people, you want to make sure you’re well prepared when it comes time to sign the lease. When renting an apartment or other living space, there are a few different options for lease agreements. In this post, we’ll review lease basics, joint leases, co-signers, and subletting.
Lease basics
A lease is a signed contract between the owner of a dwelling and a tenant of that dwelling. Most of what we’ll discuss here is assuming the space you intend to rent is an apartment complex of some kind—but the basics can apply to any number of living arrangements, including the renting of a room in someone’s house, the renting of a single-family home or duplex, or another agreement between an owner and a temporary occupant of their space. A lease outlines what is required of both parties, for how much cost, and for how long. Lease agreements can be many pages long with a lot of fine print or legalese, but it’s worth your while to read: after you’ve signed, you’re legally bound to adhere to anything it stipulates for as long as it’s in effect.
At its most basic, a lease includes what monthly rent and other fees are due and when, at what point any late fees are assessed if you don’t pay on time, what utilities are included, and what amenities or other extras are included (either as part of your monthly rent or on a fee-for-service basis). It will also outline any rights and responsibilities you have as a tenant: it might say that you are allowed use of the complex’s fitness center, for instance, and also that all residents are responsible for the disposal of their own trash and recycling. Your lease agreement will also stipulate how long it’s in effect for, and what the process is (and what fees you will incur) for breaking the lease earlier than its expiration date.
Joint and individual leases
A joint lease is an agreement between more than one tenant and the apartment complex or landlord. It’s a single contract, but allows multiple parties to share responsibility for the cost. Joint leases can be a good option for roommates to each have their name on the lease while still sharing the costs of living, including the rent. Joint leases can cause trouble, however, if someone decides to move out or doesn’t hold up their share. The apartment complex won’t care if you’re only supposed to be responsible for half the monthly rent: if your roommate bails, you’ll still need to cover the full cost.
Individual leases are separate agreements for each tenant with the landlord and are designed specifically to address that problem. Each roommate is responsible for their own rent and their own bedroom in the unit, with shared common areas like a kitchen and living room. This can help you worry less about whether or not the person (or people) you’re living with is going to pay their rent on time, or whether they’ll wind up trashing their place and losing their deposit. The downside can be that you have less control over who you’re living with: if your roommate breaks their lease, the apartment complex can rent that bedroom out to anyone else they deem qualified for a lease. It also means that, as a group, you can end up paying more for the total space than you would have with a single joint lease.
Co-signers
If this is your first lease and you don’t have established credit, if you’ve got bad credit, or if you’ve got a poor track record with previous lease agreements, your landlord may require a co-signer or guarantor. A co-signer is someone, often a parent or other relative, who agrees to be held responsible for the contract if you fail to keep up with your rent or any of the other responsibilities outlined in the lease. While the lease will be in your name, a co-signer will be equally responsible should your rent be late or if you don’t pay at all.
Agreeing to be a co-signer on a lease requires careful consideration: it is a great vote of confidence in the person signing a lease and be a huge boost to them for establishing good or better credit through the adherence to the lease. But it’s also a risk to your own credit as well. In both asking someone to be a co-signer on your lease and being asked to act as a guarantor, be very open and honest about the expectations for such an agreement. And as in all legal contracts, make sure you’re absolutely committed before you sign!
Subletting
If you need to move for any reason before your lease is up, you may be allowed to sublet your apartment to another tenant. Before you do anything, check your lease for any language about subletting. In some cases, the apartment complex may expressly forbid subletting your unit; others may treat it on a strictly case-by-case basis. Once you know how subletting is typically received by your landlord, talk to them about your situation and why you are hoping to sublet. If they give you permission to sublet your unit, make sure you get it in writing before you proceed. (If you don’t have permission to sublet, you’ll need to either find a way to stay in your current place until the end of your lease or be ready to pay to break the lease, which can cost one or several months’ rent in addition to other penalties and fees.)
Once you’ve found a sublessee, you’ll need a written agreement with them that is just as thorough as your original lease. It’s still your name on the lease, after all, so it’s ultimately still your responsibility that rent is being paid and on time and that no damage is done to the unit.
Agreeing to be a co-signer on a lease requires careful consideration: it is a great vote of confidence in the person signing a lease and be a huge boost to them for establishing good or better credit through the adherence to the lease. But it’s also a risk to your own credit as well. In both asking someone to be a co-signer on your lease and being asked to act as a guarantor, be very open and honest about the expectations for such an agreement. And as in all legal contracts, make sure you’re absolutely committed before you sign!
The most important things to remember when signing a lease are to make sure you understand exactly what your rights and responsibilities are as the lessee, and that you are prepared to be financially responsible for all rents and fees associated with the contract. It can be tedious, but ultimately helps ensure that you won’t get stuck paying for something you didn’t even know was required!
Ready to start looking for the apartment of your dreams? Check out our other resources to help you find a great new home. Already found a place and ready to sign and move? We can help you with everything from budgeting to packing strategically!
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