Use Community Room Agreement to Make Residents Responsible for Damage and Injury

A site’s community room is an ideal place for residents to throw parties or hold resident meetings. But your site may have closed its community room during the pandemic to limit social interactions and abide by local health guidelines. In fact, these type of safety precautions were common. During the course of the pandemic, the IRS issued notices stating that closing an amenity or common area during the period of April 2020 through September 2021 in response to COVID-19 doesn’t result in a reduction of eligible basis.

As more Americans are increasingly vaccinated against COVID-19, some states have started to ease or lift restrictions that were placed during the pandemic. Your site may be considering re-opening a community room. Beyond following all recommended Centers for Disease Control and Prevention guidelines and individual state ordinances as closely as possible, you may want to review your policies regarding use of the community room to minimize problems that can occur. For example, if residents or their guests act irresponsibly, they may damage the community room and its furnishings. And if someone’s injured while using the community room, your site could be held liable.

To avoid these problems, make residents who want to use the community room to throw an event sign an agreement that sets certain rules they must follow and makes them responsible for damage to the room and injury to guests. This type of agreement won’t guarantee an end to rowdy behavior. But emphasizing to residents in a formal agreement the fact that they and their guests must act responsibly will help reduce the chances that something will go wrong. And the agreement will help you get residents to pay for repairing any damage to the community room and help protect your site against liability for injuries. Here are six key items your agreement should cover.

Information on Event

The agreement should identify the resident by name and unit number and state the date, time, and duration of the rental, the type of event, and the number of guests expected. This way, you’ll know ahead of time what to expect and can make sure that you don’t run into crowd problems or violate local fire laws. For example, you can’t permit the resident to invite more guests than the community room’s legal occupancy limit allows.

Resident’s Responsibilities

The agreement, like our Model Agreement below, should spell out exactly what the resident’s responsibilities are. It should:

Set out responsibilities for damages. Specify that the resident agrees to be responsible for the cost of repairs and replacement if the community room or its contents are damaged. To be clear about exactly what items the resident is responsible for, attach an inventory of the community room’s equipment, furniture, fixtures, and other appliances, and refer to it in the agreement. Be sure to indicate the condition of each item on the list. Then, to prevent disputes over the existence of damage, encourage the resident to note any preexisting damage you failed to spot. When the event ends, the resident will be able to check that each item on the list is in good shape.

Set conditions for use. Make clear that the resident will use the community room only for the purpose he or she has specified. And make sure the resident agrees to be present at the function and be responsible for the conduct of the guests. It’s important that the person who signs the agreement and is familiar with the rules supervise the event and keep an eye on guests.

Set rules for behavior. Use the agreement to set other rules, such as keeping noise and disturbances to a minimum, complying with applicable smoking regulations, and not allowing minors to drink alcoholic beverages. And make the resident responsible for seeing that guests follow these rules.

Require guest list. Get the resident’s promise to give you a guest list before the date of the event. This will keep you informed of who is at the site, in case of problems, and help you ensure that you don’t exceed the occupancy limit set by the fire department. Make sure that the guest list includes all party planners, entertainers, and caterers.

For some events, such as open meetings, requiring a guest list isn’t always practical. Organizers don’t necessarily know who plans to attend resident meetings. So don’t require guest lists for these groups. But you still should ask for an estimated attendance number to get an idea of the size of the crowd.

Details on Deposits

A community room at your site would be an area most likely built with funds obtained through the LIHTC project. This is referred to as being included in eligible basis, which means built with tax credit dollars. The best way to determine if a project contains a community space or facility is to refer to the documents that were drafted during the application or construction phase of the project.

If your community room is included in the eligible basis, the room must remain open and accessible to the tenants in the project during normal business hours. In addition, you can’t charge rent for the use of the room or building.

Charging tenants to use the facility will result in a noncompliance finding that can’t be corrected. A charge for the facility would be any nonoptional and nonrefundable fee charged in order to use the facility. If you have a community room that you allow tenants to use, but are concerned about having to clean up after them, you can charge a fully refundable cleaning/damage deposit to ensure that they clean up after themselves.

This type of deposit needs to be documented separate from their tenant-paid rent. If asked about the deposit policy during an audit, you can furnish the use agreements and a report for review that includes the date the room was used, amount of deposit, if the deposit was refunded, and, if not, a detailed explanation as to why the deposit wasn’t refunded along with pictures to support your claim.

Conditions for Return of Deposit

Tell residents exactly what they must do to get their deposit back. Our agreement sets a number of conditions that must be met before management will return a deposit, including:

• The community room and the items listed on the inventory list must not be damaged; and
• The resident must have cleaned the community room and returned it to its original condition immediately after the event.

Reimbursement for Damages and Repairs

Tell residents that you’ll deduct the cost of damages and repairs from the deposit. And make residents pay for any extra damage. To make sure you get the right to restore the community room to its original condition, specify that you’ll deduct the cost to repair or replace damaged items, regardless of what they originally cost. Unless you specify that residents are responsible for the replacement cost, residents might refuse to pay more than you originally paid for the damaged property, leaving you on the hook for the difference.

Indemnification Clause

If someone gets hurt during a party in the community room or one of the guests damages other residents’ property by breaking into cars in the parking lot, it’s likely the injured person or aggrieved neighbor will sue the site and not the resident or guest who caused the injury or damage. Therefore, you need to do what you can to protect your site from liability for this damage or injury.

To do this, your agreement should require the resident to indemnify the site’s owner and managing agent and their principals and agents against any claims of damage or injury that result from the use of the community room. Indemnification means that the resident agrees to defend the site against any lawsuits and pay the cost of damage and injury if the site is sued.

Some states won’t enforce an indemnification clause in an agreement if that clause forces a resident to indemnify an owner for the owner’s negligence. This means, for example, that you can’t avoid liability and hold the resident responsible if someone trips over a broken floor tile or gets hurt when a chair owned by the site collapses. These are defects that are the owner’s responsibility.

Our clause limits the resident’s liability to injury or damage arising out of the resident’s negligence or the negligence of any of the resident’s “agents, employees, visitors, guests, invitees, and contractors.” Ask your attorney whether this indemnification clause is enforceable in your state.