Lease agreements are necessary — you know that. They are the DNA of your tenant-landlord relationship, but creating a fantastic one is aggravating and time consuming..
You have to make sure you cover everything… but all that legalese is boring to read/write and you’ve obviously got better things to do with your time.
So, if you’re trying to make sure you craft an iron-clad lease agreement, AND would appreciate some no-nonsense advice on what to include, then keep reading… we’ve got you covered with a step-by-step guide.
We’re going to show seven key things to pay attention to to ensure that you’re covered if anything goes wrong… plus you’ll make sure your tenants know exactly what to expect when they move in.
1. What are the Must Have Elements?
Certain pieces are needed in every lease agreement. These are the basic elements that define the: timeline, monetary aspects, and use of the rental property.
The obvious culprits here are:
- Location: Details specifying the exact rental property.
- Lease terms: This is the time period of the rental. Most commonly, this is either a one-year lease or an indefinite month-to-month lease.
(This is the common difference between a lease and a rental agreement. Generally, contracts for month-to-month rental are called “rental agreements”.)
- Money Issues: What the tenant can and will owe you and payment terms. These might include:
- Rent,
- Security Deposit,
- Late Fees, Pet Deposit Fees, etc.
For these charges, clearly detail:
- when payment is expected,
- definition of a grace period, if any, is allowed
- what form of payment is allowed or expected, i.e., online, by check, etc. - What is and is NOT included in the rental for use by tenants: This accounts for items, furniture, facilities, etc., on or about the premises.
So, for instance, tenants can use the laundry facilities in the basement but NOT the shed in the backyard. Parking is a joint facility that often needs good clarification.
The key for any and all of these lease components is to be clear, concise, and complete in setting tenant expectations. Tenants should have no ambiguity about what is done when, and their role in the relationship.
(Lots of great blogs have very detailed listings of lease and rental agreement contents.)
2. Which Features are Key to Quality?
So we know the minimum that our lease should contain, now let's discuss some other important features.
- Simple language, avoid legalese: Keep the language of the lease or rental agreement straightforward and easy to understand.
Avoid legal jargon that may confuse tenants. If your, or the neighbor's, high schooler can't follow it, you are using too much jargon. When shopping around for a lease, this should be a major criterion in your decision. - Include good definitions: If your lease must use legal terms, have a definitions section. Be sure to include clear definitions of the legal terms there.
- Make the document easy to reference: Organize the lease well and label the sections in very readable and referenceable language.
- Feel free to use appendices: Consider including expectations about behavior, property feature usage, or tenant responsibilities in an addendum or appendix. Elements in an appendix are much easier to update and maintain than text buried in the document's body.
- Discuss how disputes should be handled: To facilitate good communication, be very clear about how notices of violations, responses, and timelines for these will be addressed.
Can’t I Just Get A Good Lease?
OK, I can hear you saying:
"Fine, Fine, this is all good, but can't I just get a lease pre-written?"
The answer is obviously, "yes, you can," and, yes, you should. There are many good sources for copies of leases, and you should never try to write one yourself from scratch; it's just not worth the effort.
Where can you get one?
3. Talk to a good lawyer:
It is, after all, a legal document, so have a lawyer draft one for you. This is the most expensive option, but it does get you two things:
- An advocate and editor if you want to make changes to the boiler-plate, bog-standard lease
- Someone who understands the local, regional, and state laws and gotchas in housing rental
4. Use online contract and legal services:
Instead of paying an attorney, you can pay for online legal services.
- LegalZoom (https://www.legalzoom.com/forms/real-estate/lease-agreement)
- Rocket Lawyer (https://www.rocketlawyer.com/form/lease-agreement.rl)
- LawDepot (https://www.lawdepot.com/contracts/lease-agreement/)
- US Legal Forms (https://www.uslegalforms.com/landlord-tenant/lease-agreement-forms.htm)
5. Search online or with fellow landlords:
Look at a bunch of free copies you can find online and piece together what you like. Be sure to find documents that are for your state and preferably your region/locale. Beyond just Google searching, try online landlord discussion forums (e.g., https://www.reddit.com/r/Landlord/), or just talk to other local landlords you know.
This is a viable approach, but definitely have a lawyer review the final copy for:
- missing language,
- adherence to local laws,
- inconsistencies, and
- protections for your rental business.
Remember, just because you have a good lease document in hand does not mean it is the best for you or covers all your needs. Put the time in to read the document thoroughly. Be sure to include changes you need for your rental situation.
6. What Legal Stuff Should I Pay Attention To?
It's important to remember that state and local rental housing laws can differ. So it's crucial to research and understand any legal requirements regarding lease agreements. A good resource for this is your state's government website or contacting a local housing authority.
For example, some states require landlords to disclose certain information to tenants, such as lead paint or the presence of bedbugs. Additionally, some cities and states have rent control laws restricting how much property owner’s can charge for, or raise rent. It's crucial to understand these laws to avoid legal issues down the line.
It's also essential to carefully consider tenant responsibilities and include them in the lease agreement. These responsibilities may include maintaining the property, keeping it clean, and adhering to noise limits. It's also a good idea to have a clause regarding guests to prevent overcrowding or unauthorized individuals staying on the property who are not on the lease. Furthermore, outlining who is responsible for utilities and lawn care can help avoid disputes down the line.
Always be sure to include a clause regarding the property owner's right to enter the property for maintenance or emergency purposes. Additionally, outlining the process for renewals, extensions, and lease terminations can help prevent misunderstandings between you and your tenant.
Developing a comprehensive lease agreement that adheres to local and state laws is essential for a successful landlord-tenant relationship. By understanding legal requirements, outlining tenant responsibilities, and including crucial clauses, you can prevent any misunderstandings or legal issues down the line.
Finally, you should get legal advice from an attorney specializing in landlord-tenant law helps enormously in ensuring your lease agreement meets legal requirements.
Benefit You & Your Tenants
Let’s talk about how a good lease can serve you well.
You have secured potential tenants that seem like a perfect fit; they are great? Excellent! Now it's time to solidify that relationship with a robust lease agreement.
7. What is the Power of a Well-Crafted Lease Agreement?
Here's how a well-structured lease can be a powerful tool in maintaining a healthy landlord-tenant dynamic and even help retain the best of your tenants:
- Crystal Clear Responsibilities: Think of your lease agreement as a guiding star for your tenants. It clearly defines who does what, when, and how. For instance, it can outline when and how the monthly rent should be paid, who's responsible for minor repairs, and what the protocol is for property modifications. When everything is explicitly stated, there's little room for misunderstandings.
- Dispute Resolution: Even the best tenants and landlords can have disagreements. However, a comprehensive lease agreement serves as a roadmap during such instances. It can help navigate disputes by referring to both parties' agreed-upon terms. This can reduce the chances of minor issues escalating into significant conflicts; you have solid legal standing if they do escalate.
- Set Boundaries Right from the Start: The lease agreement allows you to set boundaries straight away. You can stipulate policies regarding noise levels, pets, handling trash, smoking, etc. This sets a precedent for the behavior you expect in your property. It might even deter potential troublemakers who are unwilling to comply with these rules.
- Retain Tenants Longer: A well-crafted lease agreement can indirectly contribute to tenant retention. When tenants know what to expect and feel their rights are protected, they're more likely to stay longer. It can also hold provisions clearly outlining renewals and incentives for good tenants to stay.
8. Why Clear Expectations and Responsibilities Tenants?
Imagine your lease agreement as the ultimate user manual for your rental property. It provides clear instructions on maintaining harmony within the property, just as a user manual ensures the smooth operation of a gadget.
This clear outline of expectations and responsibilities can make all the difference in your rental business.
- Rent Payments: Your lease should clearly define the amount of rent due each month, the due date, and acceptable payment methods. It should also outline any penalties for late payment.
Also, be sure to clearly specify how monthly rent will be paid if multiple tenants are on the lease. The best practice is to only accept a single payment for the property and let tenants figure out how to divide it.
This sets a clear expectation for timely rent payment, reducing the chances of any misunderstandings.
- Maintenance and Repairs: The lease agreement can specify who is responsible for regular maintenance, minor repairs, and major repairs. For instance, you might require tenants to handle everyday tasks like changing light bulbs while you, as the landlord, take care of significant issues like a leaky roof.
Also, you should explain how a tenant is expected to report needed maintenance, and service issues. - Plans for Renewals and Extensions: By outlining the terms and conditions for renewing, and extending the lease can help avoid misunderstandings and make the renewal process smoother.
- Consequences of Violation: A lease agreement isn't just about laying down the rules; it's also about what happens when those rules are broken. Through clear consequences of lease violations, from late rent payments to excessive noise, you give tenants a clear understanding of the potential repercussions.
- Define What Leads to Lease Termination: While having to evict a tenant is terrible, and a painful process, not being able to evict a terrible tenant because terms for lease termination and eviction were not clearly spelled out is much, much worse.
9. What Should I Take Away?
Remember, ensuring your tenants comprehend the lease agreement is just as important as creating one. Encourage them to read it thoroughly and clarify any doubts they might have.
Some landlords even do a walk-through of the lease agreement with the tenant. Doing this can be an excellent opportunity to set the tone for open and transparent communication. You also get a little face time with the tenant to establish a relationship.
Developing a well-crafted lease agreement is critical to being a successful landlord. You can create an effective lease agreement. Remember to follow the best practices of:
- clearly defining rental terms,
- outlining tenant responsibilities,
- discussing the security deposit,
- planning for renewals and extensions, and
- using simple language.
Utilizing the listed sources for sample leases can also help guide you in creating a legally sound and comprehensive lease agreement. Just be sure that what you end up with meets YOUR needs.
