What Exactly is a Multiple Tenant Lease?
The term multiple tenant lease agreement refers to a lease agreement between two or more landlords and one property. The property may be shared housing, such as apartments, or it may be commercial property, such as an office building with several offices to lease out to different businesses.
Multiple tenant lease agreements can make good sense for both tenants and landlords. Tenants find they can reduce their cost by sharing resources, and landlords find more of their property is leased which means more money in their pocket without having to sacrifice their own income stream when a tenant leaves the property . For example, when someone has a house, that person will have to continue paying the mortgage even if a tenant leaves or the other side of a duplex is vacant. In a multiple tenant lease agreement, the landlord is not so directly in this situation. However, landlords should still think of multiple tenant lease agreements in the same way as a typical lease agreement. Just as a written lease agreement for one property should always be drafted with the use of a lease agreement template, multiple tenant lease agreements should always be drafted and reviewed with the use of a template for multiple tenant lease agreements.
Essential Components of a Multiple Tenant Lease
As a rule, a tenant will not waste time looking at the lease form or reviewing the lease terms because it wants to occupy the premises. While the tenant is not overly concerned with the "details," the owner of the rental property needs to be. Here are some of the elements that commonly come up in a multiple tenant lease negotiation between the landlord and a prospective tenant.
Rental Terms. The lease should state when the tenant should make its monthly payment(s). For example, will the payment be due on the first day of each month, the last day of the month and will it be certified funds or any other acceptable form of payment?
Responsibilities. Who is responsible for paying certain expenses and taxes – utilities, real property taxes, business personal property taxes, maintenance on the real property, etc. are issues that are most frequently come up. The tenant will want to know if it will be responsible for those items, or if that is the responsibility of the landlord. On the other hand, the landlord will want assurance that the tenant will be responsible for those items, and not the landlord. A common example of a repair that frequently leads to disputes is a leaking roof. The landlord will insist that the tenant be responsible for repairing the roof, and vice versa.
Common Areas. The lease should define common areas, and what that will include (or exclude). Will it include the drive aisles, common bathroom facilities, hallways, common meeting rooms, etc., or will the common area be strictly limited to the space outside? If it includes the areas outside, will the tenant be allocated those areas based upon the size of the tenant’s premises? If so, how will that be calculated? A landlord may wish to retain the right to allocate the outlying portion of the common area to any of the tenants in the complex, which may be less desirable to the tenant.
Contingencies. Sometimes a tenant will wish to include contingencies within the lease, but the landlord may be less willing to accept those contingencies, depending upon the risk it wishes to accept. An example of a common contingency of interest to a tenant that a landlord might not be interested in accepting is the right to cancel the lease if certain sales are not met, or the tenant does not have a particular licensee. A landlord may not want to accept those contingencies because it may not be able to rent the premises in the near future if the tenant cancels the lease.
Miscellaneous Provisions. The parties may wish to include other items, such as an agreement to negotiate the lease at the end of the term.
Advantages of a Multiple Tenant Template
One of the most significant advantages of utilizing a lease agreement template is the time savings it offers. Instead of starting from scratch with each new agreement, both landlords and tenants can save precious hours by modifying an existing template to fit the current situation. This efficiency is especially beneficial for landlords who manage multiple rental units and may need to enter into new agreements on a regular basis.
Consistency is another key benefit of using a template for a multiple tenant lease agreement. Applying the same language and clauses consistently throughout all your leases can help to avoid potential misunderstandings and conflicts down the line. Tenants can be assured that they are being treated fairly and equitably, while landlords can avoid accusations of imposing inconsistent or arbitrary terms.
Finally, a lease agreement template can help ensure legal compliance. It can be daunting to keep track of all the state and local rental laws that apply to your property. By using a pre-created template, you can have the landlord-tenant relationship standardized with specific clauses that comply with the general laws. You can adapt consistent terms & conditions in all of your paperwork to cover your rental arrangement without having to reinvent the wheel each time you enter a new rental contract. It’s always easier to edit a proved template than start from a blank screen form.
Modifying a Template for Tenants
To ensure that the lease meets your requirements, you will want to customize a generic lease agreement template. The below guidelines will help you achieve that personalization while maintaining a comprehensive understanding of how multiple tenant lease agreements work.
Start with Personalization
When you are adapting a generic lease template, you must begin by changing the names of the landlords and tenants. When multiple tenants are involved in a lease, there may be just a single landlord or company leasing the property. In this case, all the tenants’ names should appear on the document, but only a single landlord name is required as detailed above. The same applies to the individuals named as guarantors.
Clearly Define All Parties
The template should include sections to properly identify each party involved, including the full name of the landlord and tenants. In situations where multiple tenants are involved, all tenant names should be included on the lease agreement. It’s typically sufficient to omit the address and contact information for each tenant unless it is absolutely essential for you. The same information should be included for the landlord, which is especially important if the landlord lives in a different state than the property.
Tailor Basic Provisions
Many aspects of the lease agreement have a time component, which must be taken into consideration when customizing a template. For example, the document will commonly state the start and end dates of the lease. This is fairly straightforward, but you must also consider the renewal process and decide whether or not the lease will continue automatically after the specified term ends . The lease may also state what happens if an end date isn’t written into the lease. Then the question of what you and the tenant(s) will do if no agreement is reached in regard to renewing the lease after it has expired.
Customize the Rent Payment Clause
For many owners, the most important section of the lease agreement is the payment clause, which details how much rent will be due, when it must be paid, and in what form payments should be made to the landlord. These provisions can usually be altered to suit your needs, including the frequency of payment. In other words, you can require that your tenants pay rent monthly, bi-monthly, or weekly depending on what works best for you. If you have multiple tenants it’s generally advisable to request that payments be made to a specific account or company rather than to the landlord directly.
Pay Attention to the Special Provisions
Depending on the tenants involved and your property management preferences, you may also want to make changes to items such as how late payments are handled, whether pets are allowed, how repairs to the property will be handled, and whether or not smoking will be permitted. There may also be clauses stating how to handle potential damages done to the property or who is responsible for maintenance items. You may also have a non-discrimination clause that holds for every tenant.
Changes like these must be carefully written using appropriate legal language so that there is no one else to blame for any misunderstandings. This is where a generic lease agreement template will serve you well because it will likely already contain the language and boundaries that you want in place to protect your interests.
Avoiding Common Mistakes
New landlords and even seasoned professionals may not be aware of the many aspects of a multiple tenant lease agreement (MTLA). Following are the common pitfalls we often see when reviewing these documents:
- Do not write, initial or type ‘X’ in as your signature. Your signature must match exactly the name provided in the lease. It is not enough to create a mark that is similar to your name.
- Make sure the person who adds their initials next to changes in the agreement has authority to do so. For example, the owner or managing member of the LLC or corporation should initial all changes next to their name because this is an affirmative representation of power of attorney over the lease. In our experience, a managing member who does not have power of attorney is unlikely to be provided power to execute, amend or terminate a lease.
- Avoid using a checklist when completing a lease. The checklist may not provide for all sections of the lease or may provide for line items when the section of the lease provides for paragraph not a checklist. If you are using a checklist, you should still read the section of the lease to ensure the checklist is complete and accurate.
- Be sure to fill in any blank spaces. If the blank space is not applicable, you can enter "not applicable" into the space.
- Do not sign without reading the entire agreement. Further, do not sign an MTLA and expect the landlord to give you a copy. You should demand a fully executed copy of the lease from your landlord when the lease is signed. In some jurisdictions if a tenant does not pay rent, the landlord may not have to prove it sent you a copy of the lease.
Legal Issues and Jurisdictional Variations
The reality of a landlord-tenant relationship which involves multiple tenants is that, in many cases, even though the landlord may be dealing with tenants in multiple states, the premises which are leased are all governed by the same landlord. As a result, it may be determined that the best way to control the relationship between the landlord and the tenants is to enter into a single lease between the landlord and all of multiple tenants residing in the premises. In such a situation, it is particularly important to address the issue of default and termination because the relationship involves multiple tenants under one lease.
What is important to note about the landlord relationship with multiple tenants is that it will often involve several unique issues such as differing rights of tenants, such as the right to tenancy or redeem and the right to possession in certain jurisdictions. Moreover, there are other issues which may arise with regard to the leasehold environment or the structure of the lease itself . It is these issues which will require certain legal considerations due to the different legal requirements will vary from state to state. To give an example of this: some leases include provisions related to tenant improvements but it may be that tenants in one state have a legal right to compensate for such improvements, absent some sort of compensation provision. This may not be the case across state lines, however, so it requires that the landlord review and amend the lease if necessary.
When drafting a template lease to accommodate multiple tenants in multiple states, it is important to review carefully the completely unrelated laws and legal requirements that could apply to that tenant. There may be legal requirements related to the following: electronic signatures, residential disclosures, rights of tenants, assignment of rent and deposit requirements, just to name a few. The landlord should be certain that the lease in its final form complies with these laws to the extent possible, and be prepared to make amendments to the template lease on a tenant by tenant basis if necessary.