Say you just bought your first rental properties and you’re ready to get started on going through applications and getting them filled. But what about the lease agreement? What most novice property managers fail to realize is that the lease agreement is their safe haven in order to keep tenants on the same page. It is a binding contract that should outline what is expected of the tenants, as well as the property manager, and should be clear and agreed upon by both parties. Here are a few things that you should make sure to have on your lease agreement and save yourself some serious trouble in the long run.
- Basic Information. Every agreement should have the basic information such as the tenant and property managers names, address of the property, and number of tenants. It should also be specific as to the length of the rental agreement, whether it be a month-to-month, a year, or a longer decided upon time. This part should also include the date in which the lease goes into effect as well as a specific date of the month for rental payments.
- Security Deposit. There should be a section that pertains to the security deposit also. A simple statement of how much it is, equaling the amount of monthly rent or higher if the property is more furnished. Also include the day on which the deposit was paid and keep a copy of the receipt with this paperwork.
- Property Maintenance. This part of the lease agreement should explain to the tenant what their responsibilities are in maintaining the property. Lawn care, gutter cleaning (if applicable), and other things of this nature should be included. Aside from outside repairs there should also be specifics of the property’s internal maintenance requirements. This includes lock changing, painting, refurbishing, and appliances as well. The lease agreement should have a list compiled of all appliances in the home as well as the condition they are in. You can also include special conditions such as assigned parking spots or noise level requirements.
- Subleasing Clause. Every property manager will have to deal with a subletting issue in their career at least once. It’s always best to include a clause about this. A statement that includes getting written permission to termination of the lease all together. In cases where a tenant wishes to have a roommate, make them go through an application process as well. It’s also a good idea to terminate the first tenants lease and start another with the new tenant.
- Concealed Defect Warning. In most jurisdictions it is required that you inform your tenants of any possible defects or something that could reasonably become a defect. For example if you know that the front porch is getting old and could start crumbling, that is something you should be explaining to your tenants in the lease. If you don’t, then you could find yourself explaining it all to a lawyer.
- Termination Statement. It is always a good idea to have a section about termination and specifics about how either party can or should go about it. The tenant should be informed of the process and results if they wish to terminate their lease either before or at the end of the lease. There should also be specifics about what can constitute reasonable cause for the property manager to evict as well. Evictions can be a tricky thing so as to not end up in a lawsuit it’s best to have everything written out and agreed upon.
A well organized property management business begins well before this, as most seasoned vets of the trade can tell you. Make sure that you are paying attention to the little details as you go- and ask around with the more experienced leaders as to what they recommend.