Would a bank release a loan to someone without a contract agreement? No, the bank wouldn’t. It’s the same way with renting out your property. You’d want to make sure that a clear lease agreement exists and is signed by you as the landlord and the renter.
A leasing agreement binds both parties and contains the landlord’s responsibilities, policies, clauses, and disclosures. A solid lease agreement will also act as a guideline to procedures for specific situations.
It provides details such as the methods of rent payment available and how to report a property maintenance issue.
What are the available ways of drafting a lease?
Creating a lease can be done on your own, through a lawyer or by following a template from other sources. If you’re a first-time landlord, it can take some time to draft a lease by yourself. A lot of things must be considered, such as State laws and local policies.
Hiring a lawyer, on the other hand, can cut down on your research time. Sourcing a template can also be a good alternative, especially if you’re looking to save. Other landlords hire a property manager to iron out the details of managing a rental unit. This includes preparing a leasing agreement.
Why do you need a leasing agreement?
Managing a rental space comes with rules and obligations. A solid lease agreement can help a landlord cut back time. It answers repetitive inquiries and makes your property policies less prone to being broken. In contrast, oral agreements can be easily forgotten and subject to different interpretations.
In court, a lease agreement will act as your protection. It will be a good source of reference to resolve conflicts that arise between landlords and tenants. Otherwise, it’s tough to prove your word against a tenant.
The burden of proof may also be heavily required to win. Having a signed lease agreement will prevent disputes from evolving into messy court battles.
What are the basics that every lease should contain?
Each lease agreement may have different clauses, but the basics remain the same. They usually contain the following important details:
1. Names of the parties involved, and the rental property’s name and address
The real names of the landlord and tenant(s) must appear in complete form. The rental property’s name is also included.
The property address must be specific and also complete, including the door number, if the rental unit is an apartment complex.
2. Rent due date
For clarity, the specific date of payment must be mentioned in the lease agreement. For example, January 1, 2021. This prevents any confusion and urges tenants to pay on the date stated.
3. Rent amount
The rent amount must be stated both in figures and words. If you’re collecting other fees such as pet deposits, it’s best to write them separately.
4. Rental duration
Spell out out the duration of the rental period. For example, the rental term is from January 1, 2021 to December 31, 2021.
If you only mention that the duration is one year, this can create a loophole. You want to avoid dealing with a renter overstaying their tenancy.
5. Signatures of all parties
It’s important for the landlord and tenant to affix their signatures on the leasing agreement.
This indicates that both have reached a clear understanding of the terms and conditions covered in the contract. It should also include the date the agreement was signed.
What are important clauses and policies to cover in your lease?
Each leasing agreement will cover different policies, depending on the landlord’s decisions. However, clauses are normally similar since they are compliant with State laws.
Here are some terms to give you an idea:
1. Subletting
If you want more direct control of identifying your property’s occupants, then decide on your subletting policy. Subletting is allowing a tenant to take in other renters to share the rent payment. If you’re more flexible, you can permit the tenant to sublet provided a prior written request is submitted to you.
2. Property access
It’s essential to respect a tenant’s right to quiet enjoyment of the rental space. This requires defining the specific conditions on which a landlord can gain entry to the property.
Otherwise, a notice period dependent on the State law is followed. If there’s no specific time period stipulated, a reasonable time must be indicated.
3. Tenant obligations
State laws require landlords to make their rental properties habitable to renters. In the same fashion, tenants also have obligations to fulfill. This can be reasonable property maintenance in terms of emptying trash in proper receptacles and maintaining an acceptable degree of peace and quiet.
4. Breaking of lease
When it comes to preventing tenants from breaking a lease, there are situations where it’s justified under the law.
Among the reasons are if your tenant has active military duty, is a victim of domestic violence or experiences landlord harassment. If you permit early breaking of a leasing agreement for scenario such as job relocation, then it should be mentioned in the lease.
5. Security deposit
Under State laws, renters have a right to know where their security deposits are stored. They should also be informed how much interest the deposit is earning if it’s placed under an interest-bearing account.
To guard against future disputes when tenancy ends, the security deposit refund process is best outlined in the leasing agreement.
Why are disclosures important in your leases?
As part of federal, state and local laws, landlords must disclose certain information to the renters. Here are some disclosures, depending on the state the property is located:
- Flood Zone – If a property area is prone to flooding, renters must be notified.
- Bed Bugs – Information about bed bugs, and how to manage and prevent them, must be circulated by the landlord.
- Radon – The presence of radon gas must be revealed for health reasons.
- Lead-based Paint – Properties built prior to 1978 should disclose the existence of lead-based paint.
The Bottom Line
Having a clear, detailed lease agreement prevents future conflicts between renters and landlords. Include every single thing that can aid in ensuring a smooth tenancy.
While crafting a solid lease agreement may initially be intimidating, knowing what to include makes the process much easier.