If you have rental properties or are looking into getting into the real estate business, you need to find a way to protect your investment. The general way that people do this is by developing and using a lease agreement. At some point in your life, you have likely signed a lease agreement but you may not remember what it consisted of. Lease agreements should have some basic language that is designed to protect you as the owner as well as the property. If you are developing your own lease agreement, you should know the legal components to include. Use this guide to ensure that you have a secure lease agreement in place for all of your tenants.
When you are forming your lease, you should always have some key components. Some of these components may change depending on the tenants, but the basic rules remain the same. Make sure you include all of these articles in your lease to ensure that it is a solid and legal document.
You should never have a lease that does not clearly define the property it pertains to. In the lease, you should not only include the address, but you should also describe the property in a way that it cannot be mistaken. For example, if you have a duplex, it should not only include the address, but also the unit number. If you do not have this as part of your lease agreement, it cannot be enforced.
Any lease should clearly define who the landlord is (you) and who the tenants are. They should be listed by legal name to ensure that the lease can be legally executed. By listing people by name, you can legally bind them to the agreement. Without names, it will simply state landlord and tenant without properly defining them by name and it cannot be executed.
Another key component of any lease is that it should have the rental amount as well as the terms. The various terms you will want to include are:
This should also include a clause about eviction if that is a possible outcome of failure to pay. You want to be very clear with this language so you can enforce it in the case that tenants do not pay the rent on time.
There should be a clear start and end date to the lease and this needs to be a part of the verbiage. You should also include how and when a tenant or the landlord can end the lease. For some people, while the lease agreement may end on a certain date, there may be an automatic renewal clause that renews the lease unless notice is given by either the landlord or the tenant of termination. If you want this as part of your lease, you will need to include it as well as termination terms.
Most landlords these days charge a security deposit before a tenant can move in. These are funds that can be used to pay for damages or unpaid rent. If you are requiring a security deposit for your property, you must include the details of how much the security deposit is, how it must be paid, examples of what it can be used for, and how and when the security deposit will be returned to the tenants after the lease has been terminated. You should be very specific with these terms to ensure there is no confusion on either end.
Even though you have already listed the tenants by name, you should also have a place for other occupants. You will want to list any children that are living in the property but who are not on the lease, for example. Additionally, you should have verbiage in the lease that details what can happen if someone not listed in this area occupies the space for a specific length of time.
Whether you are choosing to allow pets to live in the property is completely up to you. However, you should have this information detailed in the lease. If you are allowing tenants to keep pets in the property, you should have the pet information in the lease. You should also list the limitations if you are not permitting specific breeds, specific sized animals, or a specific number of pets. If you are allowing pets and you are charging an additional deposit for them, the same rules apply as the security deposit. You should include the following information:
The condition of the property should be included in the lease. You should also perform a move-in inspection with pictures, but that is separate from the lease. In addition to listing the current condition of the home upon move-in, you should detail what the landlord is responsible for repairing and what the tenant is responsible for doing throughout the course of the lease. There will likely be things that need to be repaired, and you should detail what is reasonable and what is not. Additionally, you should include information about damages to the property and whether or not the tenant will be responsible. This component can be linked to your security deposit section if you will allow these funds to be used to pay for any damages to the property that are caused by the tenant.
You may or may not allow the tenant to make changes to the property, but this will also need to be included in the lease. If you are allowing alterations, you should describe what is allowed and if anything needs to be changed back to the original condition upon termination. If you are not allowing alterations, then you need to make that clear and detail how these things will be paid for to repair if they are done.
When you lease your property, you will no longer have the access to go into the property whenever you wish. However, this section can help you detail when you can enter the property and how. You should always include this section so you have a way to enter the property and complete repairs or inspections when needed. However, you will need to provide reasonable notice and details on how you plan to do that. You should define what reasonable notice is and what the rights of the tenant are during this situation.
Your lease will not be completely enforceable without these components, so you will want to ensure that they are complete on your lease agreement every time.
While the above provisions are ones you definitely do not want to leave off of the lease, there are also some optional terms that you may want to include. These are not required, but you may find it useful to include them as a better way to protect your property. The more detailed you are in your lease, the better. Consider some of these provisions for your lease agreement if they make sense to you and for your property.
As previously mentioned, when you are detailing the terms and length of the lease, you may want to offer the right to renew. If you are automatically allowing tenants to renew their lease, then you should detail it here and require that a new lease be signed with each renewal. Any terms that you want to include should be detailed, such as an automatic rental increase for renewals. If you do not plan on allowing the tenant to renew automatically but will provide them the option in writing if you choose, you should detail when and how they will be notified of the option to renew or not.
While this is not extremely popular everywhere, you may find it useful to allow your tenants to sublet the property. If you are going to allow this, you should detail the terms. Some landlords prefer to vet these individuals before they can sublet. You may require that they apply for the rental just like the current tenant did. Whatever your terms are, you need to outline them so the process is clear. If you are not going to allow subletting, then you should also detail that it is not allowed under any circumstances. Do not leave room for this to be interpreted in any other way.
If your property provides a space to park, whether it is in the driveway or an assigned space, you will want to include these details. You want to be sure that your tenant knows the rules of the neighborhood or the parking rules. Provide them with all of the details they need. If you are restricting how many vehicles can be there regularly, as compared to visitors, then you should outline that as well.
Depending on the type of property, you may decide that some types of items are not allowed. For example, you may not allow water beds or grills on the property. If there are any items you do not permit to be there, you need to list them as well as the consequences if tenants do have the items and it causes damage to the property. You should be realistic in the items you prohibit and limit them to items that can damage the property.
Depending on the type of property, there may be other rules that you have not set but still need to be followed by the tenants. For example, if you have a homeowners' association, you should outline the rules that they enforce. If you do not have this but still need to enforce rules, such as not allowing vehicle repairs to be done on the property, then you should outline these too. These types of rules, if they are not already in place, tend to come about because of other tenant mistakes, so add things to your new leases when necessary.
Leases are an extremely important part of any landlord and tenant relationship. They are not only designed to protect the property and you as the landlord, but also the tenants. If you are using a standardized lease, you will want to ensure that these components are included as well as any optional components you may need.
Sometimes, these standardized leases do not fit your needs. If you need to customize them, you may be better off creating your own lease from these samples. Every property and tenant is unique and it should be treated as such when you are formulating the lease. Also, you never know when you will discover that you need to add something important to all of your future lease agreements. Using these tips will help you create a legal document that you can rely on and use as a guide if anything goes wrong. You do not want to be left without something like this to protect you and your property.
For more information about the legal components of leases or how you can use them to protect yourself, be sure to contact us at LegalNature today. We want to help you protect your investments so you and your tenants have a wonderful experience. Click here to create your residential lease agreement now.