When running a rental property, it’s important to treat it like a business, that includes ensuring your documents are well written, and protect both you and your tenant legally.
A signed leasing agreement is binding for both the landlord and the tenant as it holds the landlord responsible for maintaining the rental space, and the tenants to comply with the policies and restrictions set in place.
Leasing agreements outline the important procedures such as paying, rent and maintaining the property. It also provides details on pet fees, rent rates and penalties. Tenants can find property disclosures and clauses in the lease.
Even though creating a lease is important, covering all the bases on the lease can be a challenge for even the most seasoned landlord. Which is why we at Pro X Property Management have put together this guide:
Creating the Lease
You could hire a lawyer to draft your lease agreement or use an existing template. Property owners may also choose to draft the lease themselves.
But consulting a lawyer can be pricey and if you follow a template, the template may not cover everything. Landlords do have another great option though: they can choose to hire a property management company who perform a variety of services, which includes drafting leasing agreements.
Purpose of the Leasing Agreement
Depending on verbal agreements alone can be hard. For one thing, the other party may forget the discussion or may choose to interpret differently.
Additionally, if a landlord is sued by a tenant, the leasing agreement can also act as protective evidence as it’s accepted in court as a reference source. In fact, having a leasing agreement can prevent conflicts from escalating further into legal proceedings.
Covering all the Important Clauses
Leasing agreements may differ between property policies and conditions, but there are essential basics that each lease agreement has to include:
Detailed Party and Property Information
It’s required that the leasing agreement contains the complete names of both the landlord and the tenant(s) and the complete address of the rental. If it’s an apartment rental unit, the specific door number must be included.
Due Date of the Rent
The specific date of when the rent payment is due must be contained in the leasing agreement. The date must be stated in full leaving no leeway for the renters to pay late. For example, June 1, 2022.
Value of the Rent
To prevent any misunderstandings of the rent fee, the amount should be written in figures and words. The rent rate amount should be categorized separately from other fees that a landlord collects such as pet fees and security deposits.
Period of the Rent
It’s best to provide the full dates of the rental duration. For example, the rental period is from June 1, 2022, to June 1, 2023. If you only mention the term “year” then a renter can misinterpret the start and end dates. Being specific prevents a tenant from overstaying.
Signatures of the Parties
A leasing agreement can be voided if it’s not signed or dated. It’s only acceptable once the signatures of the landlord and tenant appear on it as it’s understood that both approved the terms and conditions set out in the contract.
Essential Clauses and Policies
Leasing agreements are bound by several property policies that may not look the same per rental property. Some landlords are more flexible. Others have more fixed mindsets such as permitting tenants with pets or allowing subletting.
Here are some terms to decide upon as a property owner:
Giving your tenants the option of inviting more renters termed as subletting. You can allow your renters to sublet but put it in writing that they must seek your approval first.
Every tenant is entitled to the right of quiet enjoyment and landlords should honor this. Entering the rental should only be done under specific conditions. In fact, State laws normally set a clear notice period prior to property entry of the landlord.
Just like landlords have obligations, so do the tenants: Such as keeping the property free of damage. A landlord is typically required under the laws to keep the property safe and habitable. Meanwhile, renters are tasked to observe reasonable maintenance. This covers handling trash properly to keep away pest infestation.
Breaking the Lease
Breaking the lease early can be acceptable under specific circumstances as covered under the law. For one thing, tenants who have active military duty are permitted to end their tenancy.
This is also true for victims of domestic violence who can vacate the rental by presenting proof. For those who claim landlord harassment, they could also choose to break the lease earlier.
Security deposits are handled by the landlords. Renters however retain the right of knowing where the deposits are stored. If the State laws require the landlords to place the money in an interest-bearing account, then the renters must also be aware of the interest being earned.
Lastly, tenants must also be aware of the refund procedure of the security deposit. To prevent conflicts, this should be outlined in detail in the leasing agreement.
Leasing agreements have plenty of benefits and chief among them is maintaining a good relationship between landlords and tenants. Which is why landlords should strive to use solid and lease that keeps their interests secure.
But if you have any questions about lease creation or any other aspect of property management. Please don’t hesitate to contact us at Pro X Property Management.