Sharing your house and costs (while maintaining the love)

As the cost of living increases, more people are seeking flatmates to reduce the burden of rising mortgage and rent repayments. 

While sharehousing is a good option to address rising costs, the legalities can be tricky and you should do your research before advertising a room for rent. 

Personalities also come into play, so make sure you’re fully prepared for all the things that come with sharing your space with someone else. 

Homeowners 

If you are a homeowner and rent out a room, you effectively become a landlord and that money is considered income and needs to be declared. You may be able to claim some expenses, but you also need to be aware of potential capital gains implications. It is essential to speak to an accountant about your plans. 

(Note: According to the ATO, payments from a family member for board or lodging are considered to be domestic arrangements and are not rental income.) 

While the ATO has their rules, Consumer Protection has theirs. The person you are renting to is likely to be considered a boarder or lodger rather than a tenant and, while not covered by the Residential Tenancies Act, have rights under common law. You should put your agreement in writing to protect all parties. 

Tenants 

If you are already renting the first thing you need to do is get the permission of the property owner before you take on another tenant or sublet part of the home. If permission is given, then the arrangements between yourself and your flatmates should be documented. 

Shared tenancy arrangements come under several categories: 

Subletting sees one tenant rent out all or part of the property to someone else. They become the head tenant and take on the responsibilities of a landlord including:

• Collecting money for rent, bond and other bills. 
• Property condition reports and inspections.  
• Organising repairs and maintenance (through their own lessor/agent).  

The head-tenant must lodge any bond they collect with the Bond Administrator, listing the subtenant as the tenant, and the head tenant as the landlord. 

When a sub-tenant moves out, the head tenant should conduct a property inspection and return the bond money.  

If the head tenant ends their tenancy, the agreement with the sub-tenant also ends. Sub-tenants do not have the right to remain in the property without the permission of the owner. If they want to stay, they will have to negotiate a new tenancy agreement with the owner or person replacing the head tenant.  

A co-tenancy occurs when two or more generally unrelated people rent together on the same tenancy agreement, such as a sharehouse. 

If you are in a co-tenancy, you and your co-tenants are recognised as one party, so you share responsibility for rent and upkeep of the premises. 

Co-tenants must decide who is responsible for paying rent and bills and how much is payable by each party. You should put this arrangement in writing.  

It is likely the tenancy agreement with the property owner will make each co-tenant personally liable for the whole rent amount, so if one co-tenant does not pay their share, the others will need to cover the difference, regardless of the agreement between the co-tenants. Similarly, costs for damage by one person can be recovered from their co-tenants’ bond contribution due to the joint liability. 

This means it is very important to change the tenancy agreement and get the bond adjusted if a co-tenant moves out and another moves in. It might surprise you, but if you leave and your name remains on the lease, you can still be held responsible for the payment of rent and other obligations. 

Property condition reports should also be completed every time a new co-tenant moves in.  

A rooming arrangement sees tenants live in the same property but have separate tenancy agreements. Each agreement should state which part of the premises the tenant is renting and is liable for. 

According to Consumer Protection, rooming arrangements are a good option for shared tenancies because they improve protections for tenants and can make it easier for property owners/agents and tenants to agree on issues such as bonds and who is responsible for damages. 

Moving beyond the legal stuff 

While it is tempting to bring in a flatmate to help cover costs, there are more things to consider than just the rent or mortgage and the associated legalities. 

Sharing can be problematic, even if you are sharing with someone you know well. 

For example, everyone has their own standards of cleanliness; some people like to stay up late; others go to bed early or do shift work. This can cause friction. 

You will need to agree on how you will split bills, such as electricity and water, and house rules such as cleaning, cooking, gardening and having visitors or partners stay. 

Similarly, if you are the new flatmate, make sure you are fully informed regarding costs, your rights, the house rules you will be expected to meet and how disagreements will be handled. 

You don’t want to receive any unexpected surprises. For example, a Sydney tenant was sprung charging his sub-tenants enough rent to cover his share and make a profit as well. It all came to light when they asked to be on the tenancy agreement. 

Get it all in writing so you can comfortably share the costs and maintain the love. 

For more information contact the free REIWA Information Service on 08 9380 8200 or email [email protected] (business hours are Monday to Friday 9am to 5pm).