The Financial Risks of Living with a Roommate

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Article by: Money254

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This article originally appeared on Money254. Money254 helps consumers and business owners to search, compare and apply for financial products in Kenya.

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Rent has been rising over the last few years. Like the many young professionals in cities like Nairobi, you must have considered having a roommate to share costs with and lower your housing budget.

Roommates can help you save on rent, which means you both can afford to live in a bigger house with more space, rent in a nicer neighbourhood, and lower your combined housing budgets. This is because you'll be able to split your bills from utilities to groceries and share costs like furnishings, lowering your living budgets. It can be emotionally rewarding as well.

But finding the perfect housemate isn't a walk in the park. And you can't tell how good one will be unless you first live with them. While roommates can help you save money, they can also expose you to financial risks that can hold you back. 

The financial risks of having a roommate

Before you sign the lease with your new housemate, here are some potential risks you should be aware of:

  • You will be fully responsible for the lease

Most landlords will require that you sign one lease agreement. The contract can have just your name or both of your names, but either way, you will both have full responsibility over the lease. This means you will be tasked with collecting your roommate's rent portion, adding to yours, and paying them together. Since you live under the same roof, you will pay the rent jointly.

And the same applies to damages. If your roommate damages the property, you will be equally responsible. The house owner will require that you pay or make your roommate pay for any damage caused to their property. And if not, you can lose your security deposit and face eviction or legal action.

  • You can't just evict your roommate 

After your little honeymoon and you have been living together for a while, your paths might cross. While you can work out your differences and resume normalcy, that might prove impossible sometimes, and you might be forced to part ways.

But evicting a roommate can be challenging. This is because of two main reasons. First, they're not your tenant living in your house; second, you must give them notice before evicting them.

If you signed separate leases, it would even be more complex as only your landlord can issue them with an eviction notice. You might find yourself stuck with someone you don't trust or get along with, which can cause you an emotional and financial burden.

And if you manage to evict them, you'll be stuck with expensive rent you must pay until you find a new roommate. This can significantly affect your budget. 

In the same breath, you also can't pack up and vacate without financial losses. Depending on your lease, you'll probably need to notify your landlord or risk losing a security deposit when you vacate before your lease expires. 

  • Damage to personal property

When living with someone under the same roof, mistakes and accidents are inevitable. Your roommate might stumble and break one of your pricey properties or forget to unplug an electric appliance causing a short circuit. Such damages to your property can cost you money and have you paying for bills you didn't anticipate.

When you move in with a roommate, set ground rules on how you'll approach such issues. You should require the person who caused specific damage to pay for it. It will create boundaries and respect for personal belongings.

Although it's rare since you won't be taking a stranger, your roommate can also become a thief and start stealing your property. Such behaviours typically start in small phases, and you must keep an eye out for them. Also, ensure you keep your most valuable properties like your education certificate and banking information safe, including from your housemate.

  • You risk criminal liability 

How would you deal with situations where you find out that your roommate is committing crimes? Depending on the severity of the crime, you might be forced to report it, which can affect your relationship. Not reporting can also expose you to problems.

For instance, if your housemate is caught in the act by law enforcement, you risk being brought in as an accomplice, and you'll have to prove you were not. If you get off the hook, you might still be charged for aiding and abetting a criminal, and you'll have to fight this too. Proving your innocence will be expensive, from paying bonds and bail to lawyer fees.

To avoid this, don't just take anyone as a roommate. Consider close friends like former schoolmates or workmates when searching for roommates. These are people you have known for a while and are less likely to be involved in criminal activities.

  • You might have to support them

Emergencies can arise, and your roommate might lose their source of income. When this happens, you might find yourself in a peculiar situation where you have to support them financially. Will you be ready to dig into your pockets to settle the rent and pay all the bills?

This can significantly raise your budget and might even prevent you from saving. You might also have to cut out some expenses and change your lifestyle. Unless your leases are separate, there is no escaping this, and this is a possible risk you should be well prepared to face.

When choosing a roommate, go with someone you are financially compatible with and talk about this scenario. You should commit to having a solid emergency fund that could prevent over-dependency when one of you loses their income. You should also verify this fund to avoid being caught off guard.

How to avoid the risks

Roommates can expose you to various risks, but most of them can be avoided before they move in with you. Taking the following steps can ensure you protect yourself from financial losses if you plan to have a roommate:

Background check: The most significant risk you face is your roommate defaulting on their obligations or exposing you to criminal liabilities. All this can be reduced by asking that they disclose their sources of income. Verify them and ask that they provide you with a police good conduct certificate. This will help you ascertain if they have enough income to pay the rent and bills, as well as show you if they have any criminal records.

Ask for security deposit: This is important, especially if the lease is in your name. If your roommate moves out without notice, loses their income, or delays paying their share of the rent, you can use this money to cover the rent as you look for a way forward. 

Sign a contract: Before they move in, establish guidelines for how bills will be shared, the deadline to pay rent, etc. This will help you live with little friction and prevent you from incurring any losses. You can get the agreement notarized to protect yourself, making it legally binding.

Keep your landlord in the loop: Having a roommate and collecting rent from them can be considered subletting your rented house. Doing this without your landlord's authority can cause trouble if your landlord finds out. Also, if things go south between you and your housemate, you will have recourse and an intermediary.

Sign short and separate leases: To avoid the financial burden being transferred to you when your roommate stops paying rent or moves out unexpectedly, talk to your landlord and see if they can agree to give you separate leases. The lease should also be short with a one or two months notice requirement. This will prevent you from staying in a house you can’t afford longer than you have to.

Wrapping up

Getting the perfect roommate who can keep their end of the bargain and meet you halfway can be tricky, but that doesn’t mean you should settle with the first person looking to share an apartment with you. When choosing a housemate, do your due diligence. Don’t hold back questions, and get to know them as well as you possibly can.

One last thing you might want to avoid is getting financially entangled with a housemate. Try to keep your money as separate as you can. Run your own budget, and they should run theirs. Have regular sit-downs to discuss everything and fix misunderstandings before they balloon out. 

Finally, always have an exit plan. If the situation becomes unbearable, you should have a way to get out without bringing yourself much financial loss. Always have rainy-day funds you can dig into to book yourself into a hotel or Airbnb and pay for the storage of your items as you hunt for a new house or roommate.