Apartment Life

Cosigning a Lease Carries Risk, Responsibility

By Sara Gebhardt
Saturday, February 4, 2006

Q: Does cosigning a lease for a friend who does not meet the minimum income requirements for an apartment hurt my credit? Would that cosigned lease show up on my credit history? -- Baltimore

A: Rent and utility payments generally are not reported to collection agencies unless a tenant is delinquent. As long as your friend pays his or her rent on time, your credit will not be affected, according to Rod Griffin, spokesman for Costa Mesa, Calif.-based Experian North America Inc., one of the three credit reporting agencies. "However, if the person he cosigned with stops paying rent, gets evicted, or the apartment or property manger sends unpaid lease payments to a collection agency, then it could affect his credit history," he said.

The unpaid debt would appear on the credit records of both the tenant and the cosigner, which means your credit would be hurt. Just how much depends on the lender, but "lenders will blink pretty seriously when they see a collection account," Griffin said.

So remember that you are accepting responsibility when you cosign a lease. Go ahead and do so if you wish, but discuss the arrangement and the possible repercussions in advance. Obviously, as with other financial dealings that go sour, a tenant who leaves a cosigner in the lurch and a cosigner who ends up being responsible for more than just a signature are in great risk of damaging their relationship.

To check your credit status and history, you can request a credit report from the three credit reporting agencies: Equifax (800-685-1111, http://www.equifax.com/ ), Experian (888-397-3742, http://www.experian.com/ ) and TransUnion (800-916-8800, http://www.transunion.com/ ).

There's a lot of value in knowing what potential landlords or creditors see on credit reports. The information helps people make sense of how they are perceived financially. It's also a good starting point for those who want to work to improve their credit and thus avoid asking a friend or relative to cosign a lease.

I just got my security deposit back. Aren't landlords supposed to pay you interest? I got only the original amount back. How do I figure out how much I am owed? -- Washington

First, congratulations on getting your security deposit back. You are correct; your money is supposed to collect interest over the course of your tenancy -- but only because of where you rented. Most states does not require landlords to pay interest or even put security deposits in separate bank accounts, as long as they return the sum in full when the tenancy is terminated. However, in the District of Columbia, as well as in Maryland and Virginia, landlords are required to pay interest on the deposit. In most jurisdictions, including the District, the landlord is required to outline the terms and conditions regarding the security deposit on the lease or on your receipt for the deposit.

States determine their own rules for interest. In the District, landlords are required to pay interest at the end of tenancy at an interest rate equivalent to the current passbook rate. To find out what that rate is, you can contact the financial institution at which your money was held.

In Maryland, interest must be paid at a rate of 4 percent on deposits over $50 and can be paid in six-month intervals, not at a compounded rate. In Virginia, landlords have to pay an annual rate equal to 1 percentage point below the Federal Reserve Board discount rate each year. No interest is necessary there unless a tenant occupies the same unit for at least 13 months.

I am a woman living alone in a ground-floor apartment. The sliding glass door has a metal peg insert to keep the door from being forced open, but the windows don't have a similar device that would allow me to have the window open a few inches. It's a problem now because my apartment (where I don't control the heat) is incredibly hot, even on the coldest nights. I would like to leave one or two windows open a bit overnight, but I'm afraid to do so for safety reasons. What should I do? I'm getting tired of waking up in the middle of the night because it's so hot. -- Alexandria

Although your landlord might not want to hear that you want to prop the window open during high-priced heating season, your first move is to ask him for help. There are similar security devices in the form of pegs, locks, latches, etc., that attach to windows so that you can prop them open without fear of someone entering.

You will likely need such a device on your window to feel secure during the spring and summer anyway, so ask your landlord. While you're at it, maybe you could also ask your landlord about lowering the heat. Often, however, landlords keep the central thermostat at such a high temperature both to allow heat to spread throughout the building and to accommodate those with the coldest internal thermometers.

Is there a law in Maryland that indicates a maximum amount of an annual rent increase? A friend of mine lives in a property that was sold last July. The new owners are now imposing rental increases of $100 to $400 due to renovations. -- Hyattsville

Unless you live in an area with rent-control laws, there are no specific laws about such increases. (Most of Maryland has no rent-control laws.) Landlords in most areas can raise the rent as much as they want, but usually are aware of the market rate when they do so. That's because their businesses (i.e., their rental units) depend on tenants who are willing to pay. If owners of buildings want to raise the rent exorbitantly in a non-rent-controlled area, they have to be sure renters are going to go along with the higher price.

Landlords who raise the rent dramatically would likely do so only because they think renters are willing to pay the increase. Otherwise, they run the risk of losing their tenants to landlords with more reasonable rates.

Assuming your friend doesn't want to go along with the rent increase -- to say nothing of construction during the renovation process -- tell him to investigate the going rates at other local buildings.

If the landlord's ambitions or greed seem to tip the scale, your friend should find a building that charges more realistic rents. Also, while he is searching for a new apartment, make sure he asks the landlord about planned capital improvements. He should also ask current, long-term renters about typical rent increases.

Do you have questions, comments or ideas about apartment life? Contact Sara Gebhardt via e-mail ataptlife@gmail.comor by mail, c/o Real Estate Editor, The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

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