It’s acceptably commonplace nowadays for the owner-occupant of a single family residence (SFR) to rent out individual rooms as a method of putting the unused space to work earning extra income without acquiring or adding property separate from their principal residence.

The idea has plenty of advantages — a tenant mitigates or nullifies the burden of a monthly mortgage payment, and it’s a profitable way to use extra space in the event of, say, a child leaving for college. However, there are a few things to keep in mind before jumping in. Like any other form of property management, renting a room is not without its share of landlord-tenant rules and regulations — as well as management practices that ensure the arrangement is as durable as possible.

What about fair housing laws?

Owners of multifamily rental property need to follow strict regulations when advertising units for lease. Most importantly, they may not discriminate on the basis of:

  • race;
  • color;
  • religion;
  • national origin;
  • sex;
  • familial status; or
  • disability status. [42 United States Code 3604]

However, when it comes to renting out a room in an SFR, the rules are a little different.

For example, in California, prospective landlords who rent to tenants who will share “living areas in a single dwelling unit” may advertise that unit for rent to tenants of a specific sex. This includes rented rooms as well as properties such as rooming houses where tenants share the use of common areas.

Here comes the tricky part: under California law, an owner-occupant of an SFR who rents space to no more than one person may refuse to rent out space in their residence for any reason — including those that might otherwise be deemed discriminatory under federal law — provided the would-be landlord does not use “discriminatory notices, statements, and advertisements.” [Calif. Gov. Code §12927(c)(2)(A)]

In other words, unless an owner-occupant is looking for a tenant of a specific sex, they may not advertise or solicit tenants on any basis federal law defines as discriminatory. Conversely, when the owner-occupant feels a prospective tenant for a room isn’t a good fit for their home, the safest reason to give is no reason at all.

Keep in mind an accessory dwelling unit (ADU) — aka a granny flat — constitutes a separate dwelling unit from an owner-occupant’s principal residence. Thus, advertising an ADU for rent needs to meet the same standards of non-discriminatory advertising as multi-family rental property. In other words, fair housing exemptions for renting space within a unit do not apply to the renting of an ADU.

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Get it in writing!

In many ways, renting out a room calls for the same practices as managing any other type of rental property — the tenant signs rental or lease paperwork to formalize the arrangement, the tenant agrees to make monthly rental payments and the owner-occupant agrees to maintain the property and any fixtures or appliances in the rented room.

In some cases, owner-occupants taking in tenants — especially friends or family members — will make these arrangements on an informal basis, entering into verbal commitments for the amount and date of rent payments.

Even when the owner-occupant knows the prospective tenant well, it is imperative they put the agreement in writing, and ensure it is signed by everyone involved.

This ensures that in the event of a disagreement — such as over the monthly rental payment amount or when it is due — both the owner-occupant and the tenant have documentation to refer back to. And, of course, a signed written agreement is best evidence for a court to make a decision, when necessary.

Further, when renting out a room the lease agreement needs to get specific. Remember, whoever owns the property will be living with their tenant, so points such as quiet time, shared living space, and fridge space are best covered along with standard items like the length of the lease and parking accommodations.

Types of tenancy

A written rental agreement may be couched in a couple of different ways, depending on the period for occupancy. The most common method is to use a standard residential lease agreement — as a landlord does for any other residential rental property.

Doing so will create a fixed-term tenancy, which lasts for the specific period laid out in the lease agreement. The tenancy automatically expires at the end of the lease period and the tenant vacates, unless the landlord and tenant come to some other arrangement such as extending the lease.

An alternative method, useful when the property owner does not know whether they will need the space for their own use, is a periodic tenancy such as a month-to-month tenancy, created by a rental agreement.

Other considerations

Keep in mind any rental agreement made in California — whether for a multi-family unit or a room in an SFR — contains an implied warranty of habitability. This applies even when the rental or lease agreement is verbal.

A residence in habitable condition contains functioning:

  • weather and waterproofing on windows and doors;
  • plumbing and gas utilities;
  • running water with both hot and cold temperatures;
  • heating;
  • electrical lighting; and
  • floors, stairways and railings, when necessary. [Calif. Code of Civil Procedure §1941.1]

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Any owner-occupant considering renting out a room to bolster their income needs to keep all these considerations in mind, and, with their new bank of knowledge, may go forth and prosper.