Experienced rental property owners know that having a rock-solid, ironclad lease is a necessity. It not only ensures proper communication between the landlord and the tenant but also provides protection for both parties in case a problem occurs. Keep in mind that the lease is the heart and soul of your rental property business. A properly-written lease agreement is the foundation on which successful future agreements will be based. Learn how to write a solid lease that is fair to your tenants and beneficial to you.
Qualities of a Good Lease
A lease agreement is a legally binding document that both parties (landlord and tenant) must honor. It must be clear, complete, abide by local, state, and federal laws, and reasonable. To write a solid lease, consider the following:
Legality
Starting with the type of property you can lease, along with the rent amount and the terms set in the agreement, the rent contract must meet the minimum legal standards of the city or state where the property is located.
Details About the Rental Property
The address, along with the type, size, furnishings, facilities, storage areas, parking space, and other information about the property must be included in the agreement. This will ensure that the tenant is aware of what is covered by the lease and what he/she can reasonably expect to use.
For example: – “The First Party (landlord) agrees to rent out to the Second Party (tenant) and the Second Party agrees to lease from the First Party Apartment No. 123 with three (3) bedrooms and two and 1/2 (2 1/2) bathrooms, located at 456 Snowy Road, Icylane, AL 789122.”
The detail will eliminate all doubts regarding the specific property that will be rented out, which is important if the landlord owns multiple properties or if another individual owns a similar property nearby.
Condition
The rental property must be in reasonably habitable condition and the tenant must agree with this willingly. Otherwise, it is the landlord’s responsibility to ensure that the premises are safe and secure.
Utilities
The lease agreement must specify the party who will pay for the utilities, such as water, electricity, gas, and Internet connection.
Repair and Maintenance Responsibilities
A good lease must include a clause that states the responsibility of the tenant and the landlord in the repair and maintenance of the property. This clause will also include the types of repairs, maintenance, or improvements that a tenant is not allowed to do without the permission of the landlord, such as building additional rooms, painting the walls and ceiling, or constructing new cabinets or bookshelves.
Landlord’s Access to the Property
The lease agreement must abide by state access laws that specify how and when a landlord may enter a rented property and how much time is needed after the notice to enter is given. This is usually to perform or supervise repairs or deal with emergencies.
Limits on Tenant’s Behavior
Landlords may impose certain restrictions that limit how a tenant may or may not use the premises. This may include prohibiting the tenant from using the property as a place of business, conducting illegal activities within, or accessing certain areas up to a reasonable degree. The agreement may also include how the tenant is expected to behave within the premises, such as avoiding activities that may be disruptive or annoying to other tenants and neighbors or damaging the property.
Restrictions on Property Use
Certain activities, such as smoking or building a fire for barbecues or camp-outs may also be prohibited, depending on the type of property involved and on the landlord’s preference, within reason and in consideration of local and state laws. Even small details such as prohibiting the use of waterbeds, or placing plant pots with soil on wooden floors may be stated. Some rentals may even impose a no-pets-allowed policy or allow only certain types of pets such as birds, lizards, or rabbits. Essentially, a landlord may impose any type of restriction as part of the tenant’s rental terms as long as it does not violate state laws.
Non-discriminatory and Non-retaliatory
No clause in the lease agreement must impose terms and conditions that are discriminatory to the tenant based on age, gender, race or nationality, religious affiliation, and the like. Retaliatory clauses, such as terms that are imposed to get back at tenants for whatever reason are also considered illegal.
Amendments
A lease agreement can only be modified after both the landlord and the tenant sign another written agreement that specifically designates one of the parties the authority to change a clause or several clauses in the agreement. For example, the landlord may modify the lease to allow pets to reside in the premises, which may have been prohibited in the original lease. In some cases, amendments may be necessary to help address issues that were not discussed or included in the original agreement for whatever reason. No changes in the lease may also be imposed unilaterally. Both parties have to agree on the amendments and should sign the document. Again, any changes in the contract should still abide by local and federal laws.
Termination and Eviction
A solid lease must specify the terms of termination and eviction, in case either party decides to end the agreement. These terms must include grounds for termination based on legal procedures as found in local or state laws. Keep in mind that these laws vary depending on your location, especially so if the area where the property is located has imposed rent control.
Common Loopholes to Look Out For
Tenants can easily use loopholes in a lease and create an undesirable situation for their landlord. To avoid this, make sure you have a good understanding of the types of issues you need to cover in the agreement. Some of the most common loopholes to watch out for include:
- Term of Tenancy. The term of the tenancy must specify if it is a fixed-term lease or a rental agreement. A fixed-term lease usually lasts a full year or 12 months while a rental is a monthly agreement that can be renewed unless it is terminated by the tenant or the landlord. The term must be specified in the agreement – that is, the month, date, and year of the start and termination should be stated clearly. This clause is important because it gives the landlord control over the length of time the tenant can stay on the property.
- Full Amount of the Rent. Every rental agreement should include the specific amount of rent that the tenant must pay, along with its due date, and the manner in which it should be paid (cash, personal check, in person, or mailed). This clause must also include whether or not the landlord will impose late fees in case the rent payment is late, penalties or charges in case of a bounced check, or if there is a grace period (which should also be specified).
- Fees and Deposits. Landlords often require security deposits and other fees from tenants. The amount of the fees and deposits must be stated clearly and should be within the maximum limit set by the state. The lease must also include the purpose/s of the deposit. For example, the landlord may apply it to pay for repairs due to damage caused by the tenant and other expenses that can be legally deducted from the deposit.
The landlord may also impose restrictions on the deposit, such as not allowing its use as payment for the tenant’s rent for the last month of his/her stay. The lease agreement should also include how the landlord will return the deposit and when. In some cities and states, landlords are also required to disclose where the deposit money is being kept and if it will earn an interest that the landlord will pay to the tenant. Note that some fees are non-returnable and should be included in the agreement as well.
Proper Use
The proper use of the rental property must be stated in the lease agreement. This will ensure that the tenant understands what is expected of them during their stay on the property.
Occupancy Limits
A solid agreement should clearly state who is allowed to live in the rental unit. This will protect the landlord’s right to determine the individuals who are allowed to live on the property. Usually, these include the tenants named in the agreement and by extension, their minor children. This clause will also help limit how many individuals are allowed to stay in the unit. Should the tenant sublet the unit or allow a relative or friend to reside in the property, the landlord will be within his rights to evict the tenant for violating the agreement.
Of course, this is not to say that the tenant cannot take in a roommate or can no longer receive guests. The landlord may still allow short-term stays for the tenant’s guest/s, provided certain limits are imposed. For example, the landlord may limit the time period during which the guest may stay up to a maximum of 10 or 15 days (continuous or total) within a six-month period. This will help prevent issues arising from long-term guests who gain full-fledged tenancy status, particularly if these guests have not been pre-screened and approved and are not signatories to the lease agreement.
Named Tenants
A good lease agreement should name all the adult individuals living in the unit. If a couple is living in the rental, for example, both of their names should be included in the agreement and they both should sign the lease as tenants. This is regardless of whether they are married or not. By naming all the tenants in the lease, they become legally responsible for every term and condition included in it. In case an issue happens, you can go after either tenant whose name is on the lease even if they have already separated. If one of the tenants violates a term or condition in the lease, you can even choose to end the tenancy for all the tenants on the agreement.
Know When To Hire A Professional
In some cases, it may not be necessary to ask for professional advice when drafting a lease agreement. However, the state and federal laws that govern leases and rentals are rather complicated and complex. Landlords who do not have extensive experience in real estate or are unsure about the legality of their agreement should always seek professional advice. An experienced property manager or real estate lawyer can help you formulate the correct terms and conditions that are not only appropriate but also legal and reasonable.
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