A lease agreement is a contract that is legally binding and is made between a tenant and a landlord. It emphasizes the responsibilities and rights of each party. It is limited in duration (usually a year). It's important that you make a solid lease agreement as a landlord since it will greatly affect the outcome of your rental property experience.
A good lease agreement is as detailed as possible and includes pet policies, lease terms, subleasing, rent collection terms, and occupancy limit. In more detail, here are things to consider when creating a solid lease agreement for your real estate investment!
Term of Lease
You may be surprised at how many landlords fail to include the lease term in the rental agreement. If you fail to mention the lease term, you risk dealing with a "holdover tenant," something that's very different from a long-term tenant. A holdover tenant is someone who refuses to vacate a rental after their lease has expired. And, as you are probably aware, evicting a tenant is a time-consuming process.
To avoid such problems, include the exact start and end dates of the lease in the rental agreement. Lease agreements can be short-term or long-term, depending on your needs.
Names of Tenants
Every occupant of the property must be listed in the lease. Some landlords just put in the name of the person signing the agreement which is a big mistake.
If you only have one name mentioned in the lease, you will be unable to collect rent from the other tenants.
Limits of Occupancy
Do you allow your property to be sublet? If you do, ensure you have a policy outlining the rules. For example, the landlord has an option to accept or reject the proposed sublet. The person subletting must meet the same qualifications as other tenants.
If you don't allow subletting, make that clear as well. Inform your tenants about the ramifications of subletting without your consent.
Rules for Pets
You have the option of accepting or rejecting pets. If animals are allowed in your property, make sure to have a policy in place, just like if you allow subletting. This will help in reducing future misunderstandings.
You should also have all tenants sign the pet agreement to their screening, including those who do not yet own a pet. As a result, if other renters get a pet later on, they will already be familiar with the rules.
Include the following pet-related terms in your lease agreement:
- State the species and/or breed of pets allowed
- Make it a requirement for all tenants to obtain your permission before bringing a pet into your rental property. Take advantage of this moment to ask the tenant about their pet's behaviors
- Pets must be appropriately identified, licensed, and vaccinated
Security Deposits
A security deposit is a one-time payment held by the landlord in an appropriate location as collateral for potential property damage. The landlord may use the security deposit at the end of the lease period to repair damages that are not caused by normal wear and tear.
In addition to the amount of the security deposit to be collected, you should include a definition of what constitutes damage and what constitutes normal wear and tear. This can be perplexing for tenants, so it's best to spell it out in the lease. Ensure that the lease also includes information about how the deposit will be kept and when the security deposit will be returned.
Amount of Rent
Include the rental cost and the date it’s due. This section should contain all rental-related information. Include a list of the payment methods that are accepted. You don’t have to restrict yourself to checks and money orders. A digital payment solution may offer you and your tenants considerable efficiency.
Responsibilities of Landlords
You, as the landlord, have a lot of responsibilities and obligations. Local landlord-tenant legislation imposes these responsibilities on you, but it's a good idea to reiterate them in the lease to make sure that the tenant understands them. You should also be aware that the tenant has some obligations as well that they should meet.
Most of the responsibilities of both local and long-distance landlords revolve around keeping the property in a habitable and livable condition. You can also be compelled to make sure repairs are within a particular amount of time after they've been reported to you.
Late Fees & Applicable Penalties
How much will you charge if a check bounces? What are the late fees for not paying rent on time? What are the consequences if the tenant fails to pay the rent on time? What notices will you send to them, and when would you file for eviction due to rent nonpayment?
This section should include all of this information. The type of notice and how many days of notice you must provide to tenants before filing for eviction for nonpayment of rent are specified in the landlord-tenant laws, so make sure your lease complies with those requirements.
Bottom Line
If you're looking for a property management company to help manage your real estate investment, Nelson Property Management is the one for you!
You can rely on us to prepare a thorough, detailed lease contract. A solid lease agreement will keep conflicts to a minimum and ensure that both parties know their responsibilities. Get in touch with us today for more information!
