I currently live in California and I’m planning to purchase a fairly large house-- just me on all of the paperwork.
To help with the mortgage, one of my friends has agreed to rent a room from me… but he wants to put one (or more) of the utilities in his name so as to start establishing a solid credit history.
I know this is not the board to ask for “legit” legal advice, but is there anything wrong with letting him do this?
Thanks for advice!
IANAL and I live in the UK, but as long as it is someone you trust I see no harm in it. I’ve had utilities in my name while renting rooms, it’s pretty common.
Living in Illinois, renting a house, our names are on the utilities. I did this back in college when I rented a house there, too (Wisconsin).
If you own and occupy a house and rent out a room to one person, you may want this person to be a lodger and not a tenant. A lodger is simply renting the use of your house, and you retain the right of possession of your entire house. A tenant is given exclusive possession of all or part of the house (e.g., bedroom) and has the right to keep you out of the rented space.
Lodgers have a smaller bundle of rights than tenants and are easier to get rid of if things go sour. You can give a lodger sufficient notice to vacate, then call the cops to kick them out without going to eviction (unlawful detainer) court first. Tenants can only be evicted by securing a court judgment in an eviction lawsuit first.
http://sccounty01.co.santa-cruz.ca.us/DAInternet/evictions_from_an_owner_occupied.asp
First decide whether you want this person to be a lodger or a tenant. If you decide a lodger is the best route, then you should decide how long the payment terms will be. Personally, I would go with a short term, perhaps one or two weeks.
You should have paperwork reflecting the fact that this person is a lodger and not a tenant. So, if you need police help in getting them out, they cannot tell the cops they are tenants since the paperwork clearly states “lodger” and not “tenant.”
Once all that is said and done, I would avoid anything that might confuse the issue, like putting utilities in the lodger’s name. You might put in the lodger agreement that putting the utilities in the lodger’s name is solely intended to help the lodger establish credit and does not affect the status as a lodger. That might do the trick.
There’s nothing wrong with it, but you should have him tell you the username and password for the online payment site. That way if there is any doubt (or if something happens to him) you can easily check whether the payments are up to date and and make a payment yourself if need be.
That’s a good point. Ask the utilities about account control. If your lodger fails to pay, then you want to know ASAP and you don’t want to find out when they cut the power off.
You should ask the utility what it would take to get the utilities back in your name if you have to kick the lodger out. You should ask if the utilities about how to protect yourself and get information as the homeowner … perhaps a joint account?
FWIW, your home is probably your most expensive and most important asset you may ever own. Creditors and employers place a high value on it with respect to you, your name, your reputation and your credit.
You might be doing your friend a favor with establishing their credit, but you run the risk that if they take a cavalier attitude with the utilities and payments, you may be the one who stands to lose in the long run. Of course, buying a property to rent out completely where the renter pays utilities is a different issue.
If they want to establish a credit history, better they apply for a credit card, join a credit union and start a savings account.
Draw up a use & occupancy agreement. If you want, email me and I can email you the one we use.
Demand that he hands you the bill and the check every month and that you mail the payment. If he pays on-line, demand to be able to access the account.
Does the house’s internet connection count as a utility?
I have a couple of comments.
Most likely, him having utilities in his name will not help to build his credit. It’s unlikely that any utility will report payment history unless it’s negative (collection accounts).
Putting the utilities in his name should be fine as far as worrying about the house. None of the standard utilities have the right to place a lien on the residence or make you liable for the debt. I don’t know why it’s important for you to have the log on or see the bills or anything else. If it gets that bad and power is shut off, call the electric company and have it turned on in your name. He’s the one who will have to take care of the back payment, not you.