From the MFA Mailbag: Can We Overcharge New Roommates for Rent?

Eve asks:

“Hello, my friend and I are thinking of renting out our spare bedrooms in our apartment. We live in an area were rent easily goes for $2,500+ for a two bedroom. We got an amazing deal with only paying $800, as the landlord has known us for quite a while. We were thinking of making our second living room into a shared bedroom for my roomie and I. So we wanted to rent out the additional two rooms for $375 each. Because that just about covers are rent, we would give them free laundry and parking. They would not have to worry about utilities as we would pay for all of them. Also, we have decided that we would buy the laundry detergent and basic groceries (milk,eggs, etc). Is this a fair deal? Or would we be reprimanded for asking that price for the rooms? The rooms are equal size, shared bathroom.”

MFA answers:

The fairness of the deal is not the main thing you need to consider. There are three ways your plan can fail you.

1.) There may be laws that will prohibit you from charging your new roomies more than their fair share of the rent. Check out the regulations in your city. For example, if you are lucky to live in a rent regulated apartment in New York City, the regulation reads like this:

If you are a rent-stabilized tenant, you are prohibited from charging a roommate more than a proportionate share of the rent. This means:

If you have one roommate, the maximum you can charge that person is one-half of the rent—even if that roommate’s bedroom or living area is larger or more desirable, or if they have access to more of the apartment.

If you have more than one roommate, you must charge each roommate for his or her proportional share. This share is determined by dividing the legal rent by the number of people on the lease plus the number of roommates. (Example: if three adults share an apartment, each must be charged no more than 1/3 of the rent.) This number does not include the tenants’ spouse or family members, nor the roommates’ dependent children.

If you are caught overcharging, you may be liable for triple damages or 3 times the amount you overcharge. In your case, $175 * 3 =$525 a MONTH for each roommate.

2.)  If you live in a market-rate apartment, you can charge what the market will bear, but how will your landlord react when he finds out your scheme. He is giving you a break in rent because he knows you two, he does not know these other roommates. If he does not like it, he can raise your rent to market when it’s time to renew or even refuse to renew your lease. Also, read your lease carefully to make sure there is no language there that would stop your plan. If you want to protect yourselves, in the least clear this plan with the landlord.

3.) While it is unlikely that your roommates who are getting a good deal will complain, there is still a chance that over time they start to resent you two and sour the vibe in your apartment. You can avoid that by being upfront, so they know what the deal is.

Let us know how things work out and good luck!

 

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