Owning a rental property can be expensive, and if you’re not careful, you can end up footing the bill for repairs or damages that should be the tenants’ responsibilities.
One important way to insulate yourself from such expenses is to write a great lease that covers as many contingencies as possible and clearly specifies the financial responsibilities of all parties.
While regulations vary from state to state, there are some important items that should be included in any lease or rental agreement.
Names of All Tenants and Limits on Occupancy
Every adult living in the unit should be named and should sign the lease.
This way, each person becomes responsible for the rent and any other terms of the lease.
If one tenant leaves or can’t pay for some reason, you can legally collect the entire rent from any one of the tenants named in the lease.
You, as the landlord, have the right to screen and approve who and how many people live in your property.
So, the lease should clearly indicate that only the adults who signed the lease and their minor children can occupy the unit.
This way, you can evict a tenant who moves someone else in or sublets the unit without notifying you.
Rent and Deposits
The lease should clearly state the amount of rent, when it’s due and how you expect to receive it, such as by mail or delivered to you personally.
Make all details as clear as possible, including the following:
- Acceptable forms of payment
- Amount of late fees and whether there’s a grace period
- Charges for bounced checks
The handling of security deposits causes a lot of conflict.
Avoid any misunderstandings by defining the following things:
- The exact amount of the security deposit
- How it can be used by you (to repair damages) and how the tenant can use it (to pay the last month’s rent)
- When and how it will be returned to the tenant
- Where the deposit will be held and whether the tenant is entitled to any interest earned
Repairs and Maintenance
Unless the specifics about your responsibilities and those of your tenant are unambiguously spelled out, you could find yourself paying for a lot of damage and repairs caused by a tenant’s abuse or neglect.
Specify things like:
- Your expectation that tenants maintain a clean and sanitary unit and pay for any damages they cause
- Their responsibility to notify you of any damages or defective conditions
- Clearly explained procedures for submitting repair requests to you
- Limitations on what kind of alterations they can make in the unit without your permission, such as painting or installing appliances.
If you allow pets, be specific about the size and number of pets allowed and what your expectations are for cleaning up waste in the yard.
Also, include requirements about repairing damage from pets in the repair and maintenance section of the lease.
Other terms that should be in the lease include:
- It goes without saying that you don’t want your tenants doing anything illegal in your property, but to prevent property damage and avoid expensive legal problems, it’s still best to specify this in the lease.
- Specify what, if any, businesses the tenant may run from the property.
- Learn about all local laws and health and safety codes, and make sure your lease is in compliance.
- Specify use of parking and common areas.
A lease is a legal document that is intended to protect you and your tenants.
Include these items in any of your leases to protect yourself from having to pay for something that should not be your responsibility.