COVID and Multi-Tenant Leases
I've been receiving a number of calls related to COVID and its impact on leases, particularly when there are multiple tenants on the lease. This is very common in college towns like Ann Arbor where multiple students live in a house or multi-room apartment together and all of them are on the same lease.
Here is the scenario: Four students/friends are planning on living together in a house for the upcoming school year. The lease is a one-year lease and was signed by all four students prior to the COVID pandemic. Total rent for the year is $38,400.00, divided by 12 months is $3,200.00 per month. When divided by four tenants the monthly rent per tenant is $800.00. Prior to the beginning of the upcoming school year one of the students decides that he/she is not returning to school and will not be living in the house. How does this impact the lease and the other three tenants who are planning on returning to school and living in the house?
Chances are very likely the lease that was signed contained a joint and several liability clause. What does this mean? It means that the landlord can pursue the other three tenants (or one, or two of them) for the entire amount of damages caused by the breach of the tenant who decided not to return. For example, let's say for the first month's rent the three tenants who returned to school paid $800.00 each, for a total of $2,400.00. The landlord can pursue the three tenants (or one, or two of them) for the remaining $800.00. If the other three tenants refuse to pay the remaining $800.00 the landlord can then begin the eviction process for failure to pay rent. Remember, the landlord has a lease that states total monthly rent is $3,200.00.
From our example above, let's say that the remaining three tenants decide to pay the $800.00 in order to avoid being evicted, what can they do? They can pursue collecting that money from the tenant who decided not to return to school. In other words, the landlord is not obligated to collect that remaining $800.00 from the tenant who breached, the landlord is going to pursue whoever they believe they can collect money from.
What are the options for the three tenants who returned to school?
Notify the landlord about the situation and see if the landlord is willing to modify/re-negotiate the lease. The landlord is not obligated to do this but it's worth pursuing.
See if the breaching tenant can find someone to take his/her place. Most leases allow subletting or assignment, with the landlord's permission. Keep in mind that the three remaining tenants may have to help find someone to take the breaching tenant's place because the breaching tenant may not be motivated to do this. Remind the breaching tenant of his/her obligation to pay $800.00 per month and that he/she is responsible to pay this every month until someone is found to take his/her place.
If the landlord is not willing to modify the lease and the breaching tenant refuses to pay any money, they can pay the monthly rent among the three of them, which is $1,066.67 each ($3,200.00 / 3). They can then pursue the breaching tenant for the $800.00 that was covered each month, total of $9,600.00 ($800.00 x 12 months).
Worst case scenario, the three remaining tenants are responsible for the breaching tenant's portion of the lease ($9,600.00) and they'll have to pursue the breaching tenant for that money, or the three remaining tenants refuse to pay the $800.00 for the breaching tenant and are evicted for nonpayment of rent
Best case scenario, the landlord is willing to re-negotiate the lease, or someone else is found who is willing to take the place of the breaching tenant through a sub-lease or assignment.