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In Law, what is a Rental Pool?

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  • Written By: Charity Delich
  • Edited By: Bronwyn Harris
  • Last Modified Date: 18 November 2016
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    Conjecture Corporation
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In contract law, a rental pool arrangement is formed when two or more parties agree to share something. Normally, the parties divide any expenses or revenues from the arrangement on a pro rata basis. A rental pool contract can be used for nearly anything, although it’s most commonly employed in real estate leasing arrangements and equipment sharing.

In real estate, rental pools are primarily used to lease out condominiums that are owned by multiple parties. Under this scheme, a management company generally tries to rent out the entire condo building. All unit owners in the building pool any rental revenues that are received and share any expenses associated with maintaining the building. Each owner receives a proportional share of the net rental revenue. This is true even for an owner who didn’t rent out his or her specific unit in a given time period.

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If the rental pool ultimately operates at a loss, then all of the unit owners share in the loss. Generally, the owner of a unit has unlimited access to his or her own unit. Some buildings require any new owners to agree to a mandatory rental pool arrangement prior to purchasing the unit. In this case, all owners must put their units in the rental pool, and their ability to use their own units is typically limited to certain times of the year. A management company is normally hired to rent out the units, take care of maintenance on the property, and handle any problems that crop up while guests are staying in the units.

Rental pools are commonly formed for parties needing to share equipment rental costs. For example, doctors frequently enter into rental pool contracts for expensive medical equipment and medical examination rooms. Under these agreements, one doctor may be entitled to use the equipment and exam room on a certain day of the week while another doctor gets a different day of the week. These arrangements are particularly useful for doctors who are part of a small practice and can’t afford to lease equipment on their own.

In a region with water shortages, a water district may adopt a rental pool policy. These policies are typically designed to ensure that water is properly allocated and used within a district. Essentially, they work as a water exchange market. Someone with unused water rights can offer them to the district, and the district then rents the rights to people or entities who don’t have sufficient water rights to meet their needs. This leased water is usually used for commercial or industrial purposes, such as irrigation and mining.

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