Your written rental agreement is the most crucial document you'll create, negotiate, and execute as a rental property owner. It's what you'll refer to if your new tenant has a question, and you'll need to have it handy if a dispute should arise between you and the tenant. The lease agreement tells each party what their expectations and responsibilities are.
Without a strong lease agreement, your property is at risk, and so is your relationship with your potential tenant. Here are some of the things you absolutely must have in your lease agreement and what you should avoid when you're trying to decide where to find one and how to write it.
Purpose of a Rental Lease Agreement
The primary purpose of a rental lease agreement is to establish a contract between you and your tenants. As the landlord, you agree to provide a safe and habitable property for a certain amount of time and at a certain rental amount. Your tenants, in exchange, are agreeing to pay you a specific sum of money in order to live in that home.
When you're creating your lease, you want to set proper expectations. The agreement should reflect everything that you anticipate happening during the course of the tenancy. In the lease agreement, you want to clearly state what your terms are and what you require of the tenant.
Basic Subjects to Cover in the Lease
A good lease agreement will start by identifying the parties involved in the contractual agreement. You'll need to list your name and contact information or that of your property management company. You'll also need to include the tenant's name and contact information, as well as any other residents, including minors.
Make sure the lease includes the property address and a brief description of the property, such as a single-family home or an apartment in a building. Mention the unit number and everything that's included in the rental, such as appliances and any furnishings.
Next, you'll need to be sure your lease includes information about rent. You need to say how much rent is due, when it should be paid, how it should be paid, and what happens if it's late. Include any information on late fees and other consequences. To minimize lateness, use an online rental collection app.
Your lease should also detail the conditions under which you will enter the home as a landlord. Many states have laws about how much notice must be given and whether that notice needs to be in writing, so make sure your lease reflects the relevant requirements.
The most landlord-friendly states are more lenient with these rules. If you plan to inspect the home regularly, make sure you include an inspection schedule. Maybe you'll want to visit the property every other month. If you're planning to review and evaluate the property frequently, make sure the tenants are aware of it.
Include Details of the Lease Agreement in Your Property Listing
Part of writing a great rental listing is including some of the most important stipulations of your lease in the ad so that more well-informed prospective tenants apply. It's a form of tenant screening.
- Monthly rent
- Lease term
- Rental period
- Are utilities included
- Pet Policy
- Smoking policy
- Number of bedrooms
- Number of bathrooms
- Type of unit
- Stand-out features (this can be the neighborhood, something about the unit, etc.)
Late or Missed Rent
To discourage unpaid rent, stipulate when the rent payment is due on your lease agreement and the consequences of missed rent (early lease termination, any late fee you charge, etc.).
You don't want to treat barely late rent as a lease violation since that will undermine your relationship if your tenant doesn't plan on paying their rent, or continuously fails to follow the proper eviction process.
1. Serve an eviction notice
In most instances, you have to serve your tenant with a written notice once you become aware they've violated your lease agreement. The notice tends to give the tenant the opportunity to fix the problem. This notice is a prerequisite of a court-ordered eviction.
2. File in court for eviction
If your tenant doesn't fix the problem, then the landlord or property manager has to file an official complaint or summons with the local rent court.
3. Have a rent court hearing
The eviction lawsuit will process all your documents and schedule a hearing. You may have to wait a week or months, depending on whether you live in a densely or sparsely populated area.
The landlord or their representative has to be at the hearing to explain why an eviction is justified. The tenant's presence is optional. The result of the eviction hearing is based solely on the judge's personal opinion. For this reason, even a justified eviction may be declined, with the judge suggesting other measures to remedy the situation.
4. Writ of possession
If the eviction is granted, you will be given the document that informs the tenant that they must vacate the property. It's known as a "Writ of Possession.” Usually, the sheriff or constable will deliver it, and your tenant will have to leave willingly by a certain date or be removed by force.
5. Eviction Day
This is the day the tenant leaves. Sometimes the sheriff or another authorized party will supervise the eviction at a certain time. If the tenant doesn't leave willingly, the sheriff will watch as the landlord enters, either using their own key or with a locksmith. You’ll want your contractors to get started ASAP to reduce the length of the vacancy. You may have to handle the tenant's belongings, too, if the tenant does not.
During the eviction process, you cannot do anything that will force the hand of your tenant. You cannot:
- Change a lock
- Shut off utilities
- Harass a tenant
- Remove your tenant's personal property
- Threaten to or use actual force to make your resident leave
Move-Out Instructions Are Critical
Including instructions for the move-out process is critical and must be included in the lease agreement. This is your opportunity to tell the tenants, in writing, exactly what you expect when they are moving out and turning possession of the property back over to you. Be detailed. If you want the tenants to have the home professionally cleaned and the carpets shampooed, be sure the lease reflects that. This will minimize your risk, and it will give the tenants everything they need to successfully move out of your home and receive their security deposit back.
Remember to mention maintenance items and what the tenant is responsible for doing. If you want the tenants to be responsible for landscaping, include that in the lease agreement. Many landlords forget to address the pool. If you have a pool and you want the tenants to maintain it, make sure your lease lays out that expectation. If you don't put anything in there about the pool, it will fall on you to maintain the pool for your tenants.
Walk Through the Unit with Your Tenant
As part of your rental property turnover, you should walk through your unit with your tenant before and after their move-in. That way, you both know what shape the unit was in upon move in and appropriately deal with what to deduct from the security deposit as outlined in the lease agreement.
Protect Your Investment, but Avoid Being Unreasonable
Be thorough and include details, but don't be too stringent. You might want your tenants to take care of the lawn and landscaping, but if you have trees that are over six-feet tall, you should probably have those taken care of professionally. When you set the right expectations for your tenant, and they're easy to meet, you'll minimize your own risk, and you'll increase the chances that your tenants will do everything you want them to do.
We don't like to have tenants subletting their place, so we recommend you include a clause about subletting. If you're okay with it, that's fine. But most tenants will want to sublet their property when they need to move out before the end of the lease period. You don't want to be in a situation where someone is living in your property who wasn't screened by you or chosen by
So, give tenants a chance to terminate early if necessary. We include a termination clause so that if tenants need to leave before the end of their lease term, they'll pay a fee to get out of the property. You could set something up where tenants are responsible for up to two months of the rent when they break their lease and move out, but if the property is rented in a week or two, then the departing tenant is only responsible for those vacant weeks. This gives them an out, and they won't sublet their property to someone you don't know.
Go Over the Lease Agreement With Your Tenant
You should go over your lease agreement with your tenant, as well as your fire prevention ground rules. If you don’t, your tenant may at best skim the agreement and at worst not read it at all and just assume it’s a standard agreement.
Include a Pet Policy in Your Lease Agreement
We always recommend that you allow pets in your rental unit. If you don't, you're eliminating a huge part of the rental population, and you'll probably lose money on longer vacancies. So, be sure that you're willing to have pets, but make sure that you're avoiding any of the possible damage and liability that often comes with pets. A good pet policy should be included in your residential lease agreement.
If you're not comfortable with certain breeds, for example, have a list of aggressive breeds in your policy that are excluded. You can also limit how many pets your tenants have. Maybe you just want to allow one dog or two cats. You can set requirements for the age of a pet and the size of a pet. Minimize your risk by including pet information and establishing restrictions. Decide what you're comfortable with, and create your pet policy around that comfort level. Don't be too strict by banning all pets, but have some restrictions in place, so you're covered.
Keep in mind that your pet policy cannot apply to emotional support or service animals. These are working animals; they are not pets. Unless it’s a reptile that’s not a turtle or an exotic animal, you cannot restrict the working animal because of its species or breed. You also cannot charge a fee for the working animal. You can try to contest the working animal in court, perhaps because it may be a risk to others, but the court will most likely side with the animal owner.
Running a Business out of the Rental Property
Allowing your tenant to run a business out of their rental property is like letting them own a pet: it’s usually okay so long as they cover the liabilities and, in the long run, it can save you from vacancies. Outline the stipulations for what sort of businesses are acceptable to run and under what circumstances to reduce liabilities.
The goal is to limit landlord liability and the effect the business may have on your investment and your neighbors.
- Injury from people coming and going more often to receive goods or services.
- If a business eats up more utilities, then bills could go up.
- Increased wear and tear.
- Noise complaints
Consider a questionnaire that makes it easier to determine if it’s okay to run a business.
- What is the goal of the business?
- What are the inventory needs?
- What are the hours of operation?
- What will be the client or customer interaction on the rental property?
- Will parking be necessary for customers or services?
- How many employees will be working on the property?
- Where will the work be done on the property?
- What tools or equipment are necessary for the business?
Early Lease Terminations
Nothing drives the point home about consequences for rule violations like a conversation about early lease terminations. There are all sorts of reasons a tenant may terminate their lease.
- Active Military Duty: Tenants have to give 30 days’ notice of early termination if they're called into service. After that, they don't have to make any payments.
- Breaking a Month-to-Month Lease: The amount of notice a tenant is owed depends on the locality.
- Divorce, Illness, or Non-Negotiable Job Transfer: A tenant may request early lease termination due to an unexpected life event. In those cases, they will likely pay for the property while it's vacant. During that time, you are legally obligated to actively look for new tenants.
- Domestic Violence: People subjected to domestic violence, stalking, abuse, or sexual assault can break their lease early so long as they have the right paperwork. After that, they don’t have to pay rent after 14 days.
- Violations of Privacy: In most states, a tenant needs 24 to 48 hours’ notice before someone enters their property. Repeated violations can be grounds for a code violation report or a suit.
- Lease Agreement Violations: Early lease termination can be used as the punishment for some lease violations, like letting someone move in without permission or intentional property damage.
- Loss of Employment: If a tenant cannot pay rent because of reduced hours, wages, or layoffs. Permitting an early termination is easier than an eviction. The usual fee is two months’ rent.
- Uninhabitable Living Conditions: The implied right of habitability is one of the things required of property management by law. It’s a tenant’s right to a livable space. Depending on the state, if this right is violated, the renter may break the lease with zero responsibility to pay any remaining rent. So make sure to make needed repairs ASAP!
A guest staying too long is a preventable common lease violation. Having someone visit for a week or even stay over regularly isn't uncommon and shouldn't be discouraged. It would be unreasonable to forbid these sorts of visits.
However, you may want to prevent your rental property from being used as a short-term rental or from having someone functionally move in and be a new, unofficial, and/or unpaying tenant. Consider a fee for any guests who stay more than a certain number of days per month.
Surprising Landlord Liabilities
There are some surprising landlord liabilities, but once you know what they are, you will no longer be surprised.
- Dogs: A pet policy can limit your liability. If you know a dog has already caused harm to others, you are more liable.
- Criminal Activity: In many cities, like Oakland, Fair Chance Housing Ordinances prevent a criminal background check from being a justification for denying a tenant. This makes sense considering that people are often wrongfully arrested and convicted and because people also change as individuals. At the same time, if you know a crime is being committed on your property, then you are liable. To reduce the likelihood of criminal activity, stipulate that illicit activity is grounds for early lease termination.
- Smoking: Smoking is a fire hazard, can leave stains and odors, and second-hand smoke wafting into someone else’s property is at best a nuisance and at worst grounds for a lawsuit. Consider a ban or restrictions.
- Windows and Screens: Landlords and property management companies have been held liable for children being injured due to falls out windows. So, properly warn your tenants, install screens if you say you will, and replace damaged screens ASAP.
- Bed Bugs: Landlords have to deal with bedbugs ASAP, and failing to do so may be grounds for early lease termination or a lawsuit.
- Slips and Falls: If you fail to install suitable lighting, remove obstructions, or provide enough accessibility, then you could be liable.
- Harm Caused by Employees: If any of your employees or representatives harm someone, you can be sued.
Finding a Credible Lease Template
When you create your lease, you'll want to make sure you're using a lease that is legally enforceable in your state and compliant. You can find a lot of free lease agreement templates online, but be careful about the template or the outline that you choose. Use a credible source as a template. Don't create your own lease agreement based on what you want or don't want. You need a lease that's going to hold up in court if necessary.
The State Real Estate Department
At Mynd Property Management, we always get our lease templates from the Real Estate Department of the state we're working with. Each state will have its own real estate department or professional organization, and you should try to access their forms and documents when you're looking for a great lease template.
If you don't have access to a Realtor's lease agreement, find a credible online source from another professional organization or even a professional property management company.
Look for a simple and easy template, and build off of that if you can. Our leases are usually two or three pages. You don't need a 30-page lease. It's unlikely your tenants will read it, and it will probably include a lot of legal jargon that you and your tenants struggle to understand.
You want to have enough information in your lease to protect yourself and share valuable information with your tenants, but you don't want it to be too crazy. Sometimes, landlords put everything they can in there, and they include huge and cumbersome restrictions that will turn the tenants off.
You want to give yourself 100 percent protection, but that's nearly impossible. Landlords can put anything they want in a lease; it doesn't mean it will stand up in a court. The judge may not side with you if something in your lease is ridiculous. Keep it simple.
Can You Understand the Language?
A good rule of thumb we follow is that if we can't understand something ourselves, we don't include it in the lease agreement. If you cannot explain something in plain language, it might be too cumbersome to include in the lease agreement.
Make sure someone with a high school education can read and understand it. Remember, your tenants don’t only see this - a judge may potentially see it. If you ever have to evict or defend yourself in court against a tenant's claim, you want to make sure your lease holds up.
The goal of your lease agreement is to minimize your risk without overburdening the tenant. If you have any questions about lease agreements and how to protect yourself as a landlord, please contact us at Mynd Property Management. We can help you find a great tenant and include all the state-specific language that your area requires.
Leave the Lease Agreement with a Gift
One of the gestures that encourage lease renewals is leaving a gift basket on the counter upon tenant move-in. It’s little effort or money for the property manager, but it can go a long way to making the tenant feel appreciated. And if you include items from local vendors, you can help your tenant fall in love with their neighborhood.
A well-written lease agreement will reduce your liability and increase the likelihood of landing a prospective tenant. Given the stakes, that means you should make your lease agreement reflect the living arrangement that you want! And get legal advice if you need it. Stable income will help you focus on scaling your rental property portfolio.