Receiving Rent from Joint Accounts

Posted by  wasserman 

A long-time tenant got married this year, and now has a joint bank account with his wife. If I cash a check from this joint account, would I be acknowledging his partner as a tenant? 

The basic answer is “probably not.”  We always urge members to refrain from any course of action or inaction that could be deemed to recognize a subsequent occupant as a co-tenant, even if that new resident is the original tenant’s spouse.  For example, (i) never accept rent from a subtenant; (ii) never add subtenants onto the lease agreement or create a separate rental contract with them; (iii) never include subtenants on communications, including management-related emails, notices of entry, rent adjustments, or assistive animal informational packets; and (iv) never engage in any action or line of communication that could lead subtenants to believe that there is a direct relationship, or what is known as contractual privity, between you and them.  In sum, while there is no reason for rudeness, maintaining a healthy distance is key to preserving a scenario where the original tenants remain “original” and the subsequent occupants stay as “subsequent.” 

Why are these classifications important?  Under the Costa-Hawkins Rental Housing Act, an owner of residential rental property may impose an unlimited rent increase when the last original occupant no longer permanently resides at the apartment and the folks left behind are subsequent occupants that did not have a direct owner-tenant relationship with the property owner.  At Rent Board hearings where these rent adjustments are often contested and decided, the Administrative Law Judge (ALJ) will consider such evidence as whether management accepted rent from the subtenant, the subtenant was named on communication or became a signatory to a lease agreement with the owner, or the subtenant was otherwise directly involved with the owner-tenant relationship prior to the original tenant’s departure.  If so, then the proposed rent adjustment may not be approved, and the subtenant will be allowed to remain at the unadjusted rent. 

In this case, the owner is obviously aware of the cautions required to preserve the ability to adjust rent under Costa-Hawkins.  While it is impossible to predict with certainty the outcome of any particular case, this author believes that an ALJ would not penalize the owner if (i) the check was submitted by the original occupant; and (ii) the original occupant was the signatory as opposed to the partner.  Simply because the funds may have originated from a jointly held account should not create contractual privity between the owner and the tenant’s new spouse. Indeed, with more and more payments being made electronically, the actual source of the funds is often unknown and impossible to ascertain.  In sum, maintain heightened diligence, but employ common sense as well.  If there is no direct interaction with the subtenant, you should be fine. 

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