Being a landlord is all about anticipating problems and stopping them before they ever happen. One of the best ways to prevent issues is with a rock-solid rental agreement.
The first step to the perfect lease is to cover everything about your relationship. When you show up to inspect the property, it should be “as per the rental agreement” not “I happened to be driving by and felt like it.”
When everything is spelled out clearly, you guarantee legality, make everything clear for both parties, and lay out responsibilities and rights from the beginning. See below for a full list of what you need.
Include the right information
- Names and updated contact information of both parties
- Term of the lease (month-to-month, year-long, etc.)
- Total rent and exactly when that rent is due
- Any fee for late rent payment and exactly when that kicks in
- Total amount of security deposit
- Whether or not the security deposit is held at interest
- Exactly when and under what conditions the security deposit returns to the renter
- Complete description of the property and its condition, include all furniture and appliances and any damage
- Precise explanation of who pays for what (utilities, municipal wastewater, etc.)
- Next of kin for tenant in case of an accident
Building the relationship:
- Exact conditions under which the landlord can enter the property, including how much advance notice must be given
- Whether or not the tenant may change or add locks
- Pet specifics: whether they are allowed at all, how many, and any additional deposit
- Precise explanation of duties toward maintaining the property for both parties
- Whether or not the tenant can run a business out of the property
- Who pays for which repairs and under what conditions?
Dealing with potential issues:
- Whether or not the tenant is considered automatically in default for disturbing other tenants, and what that constitutes
- Whether the tenant must pay court costs and attorney fees if they lose a lawsuit (and vice versa)
- What happens if the landlord decides to sell during the lease
- What happens at the end of the lease, including options to renew, notice of termination, and the landlord’s rights to show the property before the tenant has left
- Exactly what happens if either party wants to terminate the rental contract early
Getting it right
There’s obviously a lot to cover in a clear rental agreement, and that’s where doing it electronically can really help.
Cutting-edge landlord software can take the guess out of every step of the process, from providing you the best rental application forms to customizable lease agreements, to instant access to laws and regulations in your state. Landlord software from companies like Turbo Tenant is the safest way to make sure you’re not missing anything, and it can help you streamline your property management.
The most important thing to remember is that if want your lease agreement to hold up in court, it has to be fair and reasonable from a legal perspective. For example, if the lease says the landlord can terminate the agreement early with just two weeks notice and no penalty, but the tenant has to give a month’s notice and pay a month’s extra rent as penalty for the same thing, this fails the fairness test.
If you have a three percent fee for late payment that kicks in 48 hours after the rent is due, this is likely to pass the reasonable test. If you want to charge 25 percent at 12:01am on the day after rent is due, the court is likely to consider this unreasonable. So you’ll need to develop a keen sense of what you probably can and probably can’t do.