Ten Must-Haves for Residential Lease Agreements
Landlords have been warned for years about the importance of using legally-protective, province- or state-specific lease agreement packages that include all locally-required disclosures and addenda, but it is still common for landlords to grab the first lease that they see online that's cheap or free. There are many reasons why this is not a good idea, but the most important reason has to do with the lack of state-specific information included in many of the generic versions of a lease contract. Each U.S. state and Canadian province has its own set of unique rules which applies only to that specific jurisdiction. Furthermore, there are certain components every rental agreement should include, regardless of location, which many of these generic leases often fail to include. When not included, landlords can find themselves on the wrong side of landlord-tenant laws in their state or without a legally binding agreement at all.
Here are the top ten must haves which should be included in your lease agreements.
Terms and Dates. Surprisingly some leases aren’t specific about the terms especially when it begins and ends. The date landlords receive the first rental payment and security deposit may be very different from the beginning of the lease date, this should be clear in your lease agreement. Also, the ending date should be just as clear and should spell out how much notice is required to terminate the lease agreement, as well as what happens at the end of the lease term. For example, some landlords might prefer their leases to auto renew while others may want tenants to sign new leases each time. Landlords should be careful to ensure that this area of the lease coincides with jurisdictional lease laws. Some states do not allow auto renewals of annual leases.
Names of All Household Members. Frequently landlords will name only the adults responsible for the rent, but experts say the names of all occupants in the home should be included in the lease agreement. Tenants will often move an extra family member or new significant other in the home at some point during their tenancy, but if the need ever arises to get that person out of the home, the landlord has leverage in the fact that the person’s name is not included in the lease agreement as an allowed occupant. It’s understood by the courts that the person’s name isn’t included because they don’t belong there. Similarly, the names of all children in the home should be included as well. Parents sometimes have to prove to school officials that they have custody of their children. Having a lease with the children’s names included can provide that proof.
Security Deposit Details. This is another obvious item which is often left out of lease agreements. All leases should include the amount of the security deposit and should spell out whether the amount was paid in full or in increments. The date of the security deposit as well as the method of payment is also helpful. In addition, most states and some Canadian provinces require information regarding where the security deposit will be kept, whether it will accumulate interest, and to whom that interest will be paid, if applicable.
Pet Deposits. Some leases fail to include whether or not pets are allowed and whether there are any associated fees such as pet deposits and/or pet rent. Another important element to include would be information about its refundability as well as any restrictions regarding weight, type and number of pets allowed.
Miscellaneous Fees. Another area where landlords find themselves getting into trouble is in including fees which are not in compliance with state law in their areas. Certain fees are expected such as late fees, however most jurisdictions have limits on how much tenants can be charged for late fees. Other common fees such as returned check fees, lost keys and cleaning fees should be clearly spelled out in the lease and should be in compliance with the state laws. The rule of thumb here is, if you plan to charge it, it should be detailed in the lease. If not, you will have a difficult time collecting on it, if at all.
Clarify Penalties. It is inevitable that, at some point in every landlord’s career, at least one tenant will break the lease by moving out before the lease term end date. When that happens, landlords usually want some kind of compensation for the loss of rent during that time. Landlords should be knowledgeable about what is allowed in their state when it comes to penalties for early termination. Some states do not allow any kind of penalties, but will allow compensation for commission to realtors and reimbursement for advertising expenses and other related charges for returning the home to market. Also, most states allow landlords to collect every month the home is vacant from the breaching tenant as long as the landlord actively pursues a new tenant in the process.
Lead-Based Paint Disclosure and EPA Pamphlet (for Homes Built Before 1978). These are legally required for all U.S. rental properties built before 1978. Failing to provide adequate documentation here is a common route tenants take when they want to sue their landlord.
Utilities. Another area often overlooked is utilities. It should be detailed in the lease exactly what utilities, if any, are included in the lease, and which utilities the tenant is responsible for paying. Also, landlords should be specific about the timeline for turning service on and off. Many disputes have ensued over tenants’ faulty belief that they had a certain number of days in which to switch services over to their name when the landlord expected something very different. Similarly, language should be included indicating the number of days tenants should allow for utilities to remain on after move-out. It’s common practice, but not a very smart one, to schedule utility shut-off for the same day the lease ends; however that leaves little time for any cleanup which may be needed once tenant leaves. This all should be outlined upfront and in the lease agreement so that everyone is on the same page on these key issues.
Landlord Entry. Another common dispute area among landlords and tenants is in the confusion around when and under what circumstances landlords are allowed to enter the home. Some landlords believe they should be able to enter the home whenever they’d like. Not so. It may still legally be the landlords home, but it becomes the tenant’s home once they begin paying the monthly rent which comes with certain rights. The lease should include concise language regarding this issue. Most jurisdictions require at least a 24-hour notice to tenants before landlords can enter, except in emergency situations.
Repairs and Maintenance. Always include language about who’s responsible for the maintenance and repairs of the home. In most cases, the tenants will be responsible for the general upkeep and landlords are responsible for major repairs. In cases where landlords expect tenants to pay for repairs, it should be included in the lease. If tenants are expected to pay up to a certain amount, that should be specified as well. Landlords must also remember to be specific about any preference for professional work versus amateur repairs as well.
Lease agreements are complex legal contracts, and millions of landlords end up in court every year trying to enforce their rental contracts, so landlords are wise to take them seriously and remember that the first thing the judge will ask to see in court is the lease agreement.
What must-have is included in your lease agreements not seen here?