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Writing a Lease for a Third Party Payer

Published by ezLandlordForms on

While many properties are rented by individuals or families who will personally live in the home, there are cases when third party organizations want to pay the rent. As a landlord, you may encounter businesses, houses of worship, or relocation agencies who want to cover the rent on an individual’s behalf. Large companies looking for flexible corporate housing may wish to rent a unit, pay the bill, and have the flexibility to move trainees and temporary workers in and out of the unit as needed. Or religious organizations may cover housing as part of the compensation package for their congregation’s leader.

Landlords need not shy away from these situations for fear of a confusing arrangement or a compromised lease. In fact, sometimes a landlord will be rewarded when these entities pay a higher rate of rent. The first key is to identify exactly what the arrangement will be, to determine who will pay and who will inhabit the property.

An arrangement with a third party payer can be a great deal for the landlord. However, just because a business or congregations steps up to pay the bill, you must evaluate them as you would any other tenant. To help ensure that you are protected, here are some important steps to follow:

  1. Do a full background check – First, approve the actual resident whenever possible. This background check and credit check will tell you more about the person who will actually be occupying your unit. Credit checks can also be run on businesses. Seek out key information such as how long the company has been in business, and check with trade organizations that they are a part of. Background and credit checks are key for everyone involved.

  2. Meet with everyone involved – Ask if you would allow this person to live in your unit. If a business will be using this for short-term housing only, and does not necessarily know who would be living there next, ask yourself if you are comfortable with that arrangement. A problem tenant will have to be dealt with, whether a company is on the lease or not.

  3. Put everyone on the lease – It is crucial to include the third party on the lease agreement as a lessee. This makes the third party responsible for the rent, and you will have the assets of the business or organization to guarantee your rent payments. Be sure to list each person who will be living in the unit on the lease, including any family members. Clarify who will be providing the rent payment. Imagine that you do not get the rent one month. Do you know exactly where the late notice should be sent? You don’t want to be scrambling to figure that out while you are waiting on your rent.

  4. Consider higher security deposits as allowed by the law – If you are still feeling a bit unsure about the third party arrangement, think about increasing your security deposit. This additional cushion may help to put your mind at ease. It is critical to check your local laws regarding the security deposit.

You can also protect yourself by requiring that the tenant get renters insurance, as allowable by law. Find out what insurance the business or other entity can bring to the table. Make sure your liability insurance is giving you coverage for property damage. Make a note of these in the lease so that there is no question on responsibility for any damages to your rental property.

In the final tally, every tenant comes with risks. Even a tenant who has a perfect credit score may cause you issues in other departments. In the non-traditional arrangement with a third party, you gain the security of working with an additional entity to guarantee your rent.

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