What are the financial risks of living with a rommate?
Roommates aren’t just for college students. When I was single in my 20s and 30s, I always lived with roommates.
Housemates help lower your rent or mortgage, utility bills, furnishing costs, and maybe even your food costs. They can help you boost your savings rate, and possibly even cover your entire mortgage payment in a form of house hacking. Often they can become lifelong friends — several of my old housemates remain among my closest friends to this day.
But watch out: While most roommate arrangements start off with a cordial handshake, once a roommate moves in, the arrangement takes on legal authority under state and local landlord and tenant laws. That makes getting rid of a troublesome roommate difficult.
Beware of these common dangers of joining your living space with another adult, and follow specific steps to avoid or minimize problems.
Risks of Living with a Roommate
Some of the risks of living with another adult are obvious, such as noise or conflicts over bathroom time. But make sure you fully understand all the risks of living with a housemate, not just the most obvious.
1. New Lease Terms
If you currently rent a home and invite a roommate to move in with you, it usually requires permission from your landlord. Most landlords include an occupancy clause in their lease agreements, restricting the occupancy to those explicitly listed in the original lease.
When you tell your landlord you’d like to bring in a roommate, they often require that you and the incoming tenant sign a new lease agreement with both of your names on it. That may push back your lease end date, as new leases typically come with a one-year term.
Worse, it may also mean a new, higher rent payment. More people living in a home means more wear and tear on the unit, after all.
2. Full Financial Liability for the Lease
Most lease agreements worth the paper they’re printed on include a joint and several liability clause. In plain language, it means each adult tenant assumes full liability for the entire rent payment — not just their potion — and full liability for any damage caused to the unit.
If your roommate decides to stop paying their share of the rent, you’re liable for the whole rent payment. If they punch holes in the walls, you’re liable. And if they run off to Mexico never to be seen again, you still owe the full rent through the end of the lease term.
Should you fail to pay as well, you can be evicted and sued for unpaid rent. An eviction can make it difficult for you to rent a new place to live, and a court judgment hurts your credit score for years to come. Debt collectors can garnish your wages to collect on that judgment, or put a lien against your car. And you can expect a hard time qualifying for a mortgage to buy a home with a judgment sitting on your credit report.
Your only recourse in such a situation is to sue your roommate for back rent in small claims court, and even if you win, you are on your own for collecting your judgment.
3. Evicting a Roommate Isn’t Easy…
Everyone loves to oppose evictions — until they’re stuck with a non-paying roommate or tenant of their own.
But the eviction process is a slow one in most states, allowing the offending renter months to correct their violations. It takes time, money, the approval of a judge, and the cooperation of your local sheriff.
If you own your place or you are subleasing to your roommate, you can file the eviction papers yourself if you have grounds. Bear in mind that not getting along isn’t grounds for eviction. You’ll have to prove that your roommate violated the lease contract, such as by failing to pay the rent or committing a crime on the property.
If your roommate has a lease directly with your landlord, only your landlord can evict your roommate. If you can’t persuade your landlord to evict your roommate — which most landlords are reluctant to do, given the time, money, and hassles involved — you may be stuck with your roommate until your lease ends.
4. …But Moving Out Early Isn’t Easy Either
Just because you don’t get along with your roommate doesn’t mean you can move out early either. Neither you nor your roommate get a pass on the legal obligations under the lease contract you signed. That means you’re usually stuck together for the rest of the lease term.
If your situation is truly dangerous, you may be able to persuade your landlord — or even a judge if necessary — to let you move without any financial obligation. Read up on legal ways to break your lease if you get truly desperate.
Without such an exception, you remain legally responsible for paying the rent through the end of your lease term.
5. Personal Property Damage and Theft
Housemates can steal your belongings, and it isn’t always obvious. We all misplace personal belongings, and it’s hard to prove your roommate took something rather than you simply losing it or forgetting where you put it.
Fortunately, thieving roommates tend to be rare. More common problems occur when your roommate breaks something of yours by accident, or spills red wine all over it, or borrows it and you both forget about it.
When you share personal space with someone else, casualties are inevitable. Take measures to protect any belongings that truly matter to you, such as keeping high-value jewelry or heirlooms in a fireproof safe.
6. Criminal Liability
If your roommate leaves an eight ball of cocaine lying on the coffee table when a cop stops by, you’re going to have your own explaining to do.
Your roommate’s illegal activities leave you with several problems. First, you may have to prove that you did not participate, or that you don’t own any of the illegal contraband. Which in turn means pointing the finger at your roommate — a surefire way to implode your roommate relationship.
Even if you prove you weren’t involved, you may also run into the problem of knowing about criminal activity and not reporting it. That risk depends on the extent of your roommate’s infractions; their smoking the occasional joint doesn’t pose much risk to you legally, but them running a significant drug dealing operation out of your shared home might.
All of which poses financial liability for you as well. If charged, you’ll have to cough up money to hire an attorney to defend yourself. For less serious offenses, the state often fines you rather than charging you, and it may cost more to defend against it than to simply pay the fine.
Prevention: Ways to Protect Against Roommate Risk
Life is full of risk. Trying to avoid risk is not only impossible but leads to a loss of opportunities.
Instead, aim to manage risk. Whether you’re starting over financially after a breakup or simply aiming to make your rent more affordable and boost your savings rate, follow these steps to manage the risks of sharing your home with a roommate.
Screen Roommates Financially
Before signing a shared legal contract with another adult, you need to know they can and will adhere to it.
Verify their income and employment. Ask to see their rental application before they submit it to the landlord. Ask about their credit history and whether they’ve ever been evicted. Make sure they have enough cash to cover the first month’s rent and security deposit, with plenty left over to cover their other bills. Ask about their emergency fund and approach to budgeting.
Then ask about their working hours, whether they ever work from home, and every other work- and finance-related question you can think of. Your roommate’s pets and guests can cost you too if they damage the rental unit, so ask about them as well.
Make sure you also ask probing questions about personal compatibility, because if you end up hating your roommate, you can’t just cut your losses and move out early. Leave no stone unturned as you get to know the person who could share a home with you.
Run a Background Check
Admittedly, I’ve never actually run a criminal background check on any prospective roommates. But if you worry about the person’s criminal background, then go ahead and run a background check on them to help you sleep better.
Sign Separate Lease Agreements
Everything in life is negotiable, including your lease. Aside from negotiating lower rent, you can also try to negotiate for separate lease contracts for you and your roommate.
Savvy landlords won’t allow it because they want the ability to collect from the most responsible party if the other party skips town. But many landlords aren’t particularly savvy or experienced, or they may be so anxious to fill a vacant unit that they accept separate leases from each housemate.
This way, you aren’t on the hook if a deadbeat roommate stops paying the rent or moves out before the lease term ends.
Draw Up a Written Roommate Agreement
Sit down with your prospective roommate and work out a roommate agreement.
Iron out the details like how you’ll cover shared expenses, who will supply which furnishings, house cleaning schedule, and move-out notice. Get extremely intentional about shared finances, and follow good-sense roommate money management rules. Establish ground rules about cleaning, noise and quiet hours, whether significant others can stay over on a regular basis, and other overnight guest frequency.
Then put the agreement in writing, and sign and date it.
Not only can having the agreement in writing prevent misunderstandings, but it can also help you in court if you need to sue your roommate for back rent or damages.
Don’t Get Romantically Involved With a Roommate
Not getting romantically involved with your roommate sounds so obvious. Yet I’ve seen roommates start dating, and it never ends well. It’s too convenient, and too much shared intimacy too early.
Avoid the situation entirely by discounting prospective roommates that you find yourself even the slightest bit attracted to. Don’t disqualify a roommate based on their sex alone — some of my best roommates have been women — but do avoid people you would ever consider dating in a million years.
If you do find yourself in a living situation where you and your roommate start feeling romantic chemistry, one of you should move out before you go on a first date.
Aside from the obvious risk to your quality of life, the financial risk is finding yourself locked into a lease with full legal liability. When one person inevitably moves out early and stops paying the rent, the remaining person has a choice: cover their rent or assume liability.
Read Up on Local Landlord-Tenant Laws
Landlord and tenant laws are different in each state, and some cities and counties have ordinances that give tenants and landlords additional rights and responsibilities. Before you take on a roommate, read up on these laws.
Good places to find up-to-date information about landlord-tenant issues include websites sponsored by your state attorney general or local Legal Aid Society. The United States Department of Housing and Urban Development’s website offers a list of state housing resources, which includes links to landlord-tenant information.
It doesn’t hurt to know this information regardless, but if you own the home or are subleasing the unit, you especially need to know your rights and responsibilities.
Make Sure Your Room Locks
If you worry about keeping valuables safe, get a lock (with your landlord’s permission) for your bedroom door. Unless your roommate is skilled with lock-picking tools, breaking the lock or removing the door takes work and leaves signs.
But really, if you have to lock your door out of fear of your roommate stealing your belongings, you did a bad job screening them in the first place.
Most roommate situations don’t turn sour and can save you a massive amount of money on rent or your mortgage. I never once lived alone as a single person, and I don’t regret living with any of my former housemates. Well, most of them anyway.
But it takes foresight, honesty, and prevention on your part when you screen prospective roommates. Do your due diligence, take your time, and find the perfect person to share housing expenses with, and you can make a lifelong friend. Rush into living with someone, even an existing friend, and you can find yourself in a nightmare that you can’t easily escape.