Renting

Types of leases: what first time renters should know

Before you go signing any dotted lines, it is probably wise to know what you are signing. Knowing about the types of leases available to renters will help you make the best decisions when it comes to your next move.

Types of leases: co-tenancy vs. sub-tenancy

A question as old as time itself: should you sign a co-tenancy agreement or go after a sub-tenancy agreement? And what on earth is the difference?

Different types of leases suit different people in different stages of their lives. A couple with two kids may be after a different leasing arrangement than a group of 20-somethings moving into their first home.

If you and your friends are planning on moving in together, it is worth considering what type of lease you should sign. This can often be forgotten in the midst of the excitement or the nightmare of finding a place to call home.

First time renters

1. Co-tenancy:

A co-tenancy/joint tenancy agreement is signed by all tenants of the property. As such, all tenants are responsible for the property and the payment of rent in full. Why the bold letters? Because if one tenant happens to fail to pay their share of the rent, everyone is responsible. Under a co-tenancy agreement, each individual is considered as a collective, sole tenant.

This is a very common form of tenancy agreement as it allows landlords to stay on top of who is living in the property. It also places responsibility on the shoulders of every tenant, ensuring a greater chance that the landlord will receive rent on time.

2. Sub-tenancy

In a sub-tenancy agreement the greatest positive is that, as the tenant on the lease, you have the freedom to choose who you want to live with and split the rent as you choose. This may suit a couple who wish to share their home with one other person to help limit their rental payments, while allowing them the freedom to choose the person they live with.

When reading a tenancy agreement, whether it a sub-tenancy or co-tenancy agreement, make sure you look out for and agree with your co-tenants on the following:

  1. What is the rental amount?
  2. What is the bond?
  3. How long is the tenancy agreement? 1 month, 6 months, 12 months, 18 months? Your lifestyle and future plans may dictate what length of lease you are looking for.
  4. Restrictions/rules: are pets allowed? Are improvements, such as new carpets, that have been promised to you, mentioned in the lease agreement?

chart showing the differences between sub-tenancy and co-tenancy

Sub-letting a room/property

A head tenant may choose to sub-let part of a property to you. In this situation, they take on the legal responsibilities of the landlord. As the subtenant, your name does not appear on the lease.

In this case, you may find you do not have the same level of rights as someone on the lease. This can be advantageous as it allows you the freedom to move around if that suits your lifestyle. On top of this, unlike co-tenancy agreements, a dispute between a head tenant and sub-tenant can be heard by VCAT.

Sharing a rooming house

A less common option is to rent a room within a rooming house. While you will not be on the lease, you may choose to have an exclusive room right. With this you have the choice to share the room with someone of your choice or occupy it yourself. You may alternately choose a shared room right. With this, the owner of the rooming house can choose who else lives in the room. In this case you have the lease choice, but the greatest freedom to move if it suits you.

Boarding

Boarding allows you and a home owner the option to either enter into a traditional tenancy agreement, or not. If you do, then the boarder essentially becomes the tenant and the homeowner the landlord, even though you may only be renting a room within the property that a homeowner also occupies. This can be an attractive short-term option for those new to a city or town and for other solo-occupants as a way to afford living close to the city.

For more information about types of leases, weigh up the pros and cons of co-tenancy and sub-tenancy agreements as well as month-to-month leases.