Process his application just like you would process anyone else's. Amend the current rental agreement (or make a new one) so that they're named as a tenant on the agreement (which makes them 100% responsible).
I wouldn't think an increase is totally necessary unless utilities are included or something; but if you can and they go for it then go for it, I'd hate to lose a good tenant over a small increase though so that's something to judge.
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Uncertainty is an uncomfortable position.
But certainty is an absurd one.
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