Managing a rental property requires many different skill sets along with a continuous focus of staying on top of legal responsibilities attached to it. One of the most critical parts of managing and owning any successful property is ensuring rental lease agreements are legally compliant and thoroughly written so tenants are clear on their responsibilities. For some companies, a poorly written lease could mean millions in lost revenue over time, in additional to other liabilities.
Below are the key terms you need in any rental lease agreement:
- Names and addresses: both the landlord “lessor” and tenant “lessee” should be clearly named and both should have addresses on the rental lease agreement. If the landlord has a registered agent or other company that is in charge or receiving documents, that should be included on the lease.
- Rental property address and relevant information: the property’s address should be listed in addition to any relevant information regarding use of the property such as a parking space, storage, or furniture that comes with the use of the property.
- Length of tenancy: the agreement should clearly spell out how long the agreement is for and what date it must be renewed by. It should also spell out whether tenancy is month-to-month or for a longer term, typically a year.
- Rent: the amount of money due each month is an obvious inclusion for anyone looking to make a profit. There should also be language regarding forms of payment and late fees. Additionally, this is the section where any deposits and fees such as a security deposit or cleaning fee should be spelled out. There is typically no limit on the amount of rent that can be charged, except in areas with rent control. However, it is absolutely prohibited to base a tenant’s rent on age, gender, race, or more. Make sure your rental property (from your rental amount to your leasing procedures) is compliant with the Fair Housing Act and your state’s protected classes.
- Utilities: who has responsibility for paying which utilities each month. Tenants often pay for internet, electricity, and gas when applicable while landlords typically foot the bill for water.
- Property/unit condition: Many rental agreements include language ensuring the tenant agrees that the property is in livable condition, the tenant promises to contact the landlord about any dangerous condition, and there are no major defects.
- Tenant repair/maintenance: most rental lease agreements state that tenants must keep the property clean and in a well-maintained condition. While some agreements state the landlord will be responsible for maintenance, others provide for charges for tenant-caused neglect such as through broken windows, clogged drains, holes in the wall, or other similar items.
- Landlord entry & extended absences: most agreements include a clause pursuant to state law on when and the manner in which landlords can enter. Additionally, some agreements include language on notification of tenant absences for seven or more days in order to allow the landlord to provide routine maintenance.
- Miscellaneous restrictions: most leases include limits on the number of days guests can stay, a restriction on loud or obnoxious tenant behavior, and restriction on subleasing without consent of the landlord. Additionally, they often include a prohibition on pets and operating home businesses.
As with any legal agreement, landlords should consult an attorney or seek counsel before drafting any contract which binds them to a specific set of obligations. The last thing you want is to be on the hook for something you didn’t know were responsible for.
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