The rental agreement between a landlord and a tenant is one of the most important documents in their business relationship. These papers list out both the responsibilities and rights of both parties, so it’s critical that it’s done correctly from the very beginning.
We don’t want you to lose any sleep over this thing. That’s why we’ve put together this ultimate guide on rental contracts.
What Your Rental Agreement Must Include
Every contract is a little different, but there are a few pieces of information that have to be on there, no doubt about it.
Where is the property? If it’s a multifamily unit, which apartment/suite is it? This is probably self-explanatory, but there’s a reason why it’s at the top of the agreement.
Agreement to Lease
What is the document all about? The landlord is leasing the property to the tenant according to the terms and conditions of the document.
How long will the lease last? What are the beginning and end dates?
How much does the tenant owe the landlord each month? When is it due? How will the tenant pay the landlord? When is the very first payment due?
Use of Premises
What will the tenant use the property for? In residential contracts, this usually includes verbiage similar to “The premises will be occupied only by the tenant and his/her/their immediate family and used only for residential purposes.”
Nobody likes this topic, but it’s a big one. The landlord should always require a security deposit to help cover damages to the property caused by the tenant. The amount is up to the landlord, but it is often the equivalent of a month’s rent. This section should also highlight how many days after the contract ends, the landlord has to return the tenant’s security deposit (or a receipt from the damages paid for.)
What utilities are handled by the tenant? Sometimes it’s all of them; other times, it’s all included in the monthly rent.
Who is responsible for repairs to the property? As Drew from Bigger Pockets points out, you should be very specific about what the tenant is responsible for. This can be a major headache, especially if the tenant does much damage. You’d be amazed at what a little dog or child can do when left unattended!
Be very narrow here. If you leave it up for interpretation, you will get undesirable results. Remember that people have all kinds of pets, but usually, a pet clause includes what types of pets aren’t allowed. Dog breeds seen as more aggressive than normal, such as pit bulls or Dobermans, are commonly named.
If the home is in a community- or even if it isn’t – there are usually a number of regulations the person living in the home must follow. What’s allowed in the yard? Lawn watering times. Parking in the street. There are a lot of things that can go here, so include as many as possible.
There are two ways to do this. You can either list what a tenant is allowed to do or what they aren’t. The biggest thing to keep in mind is that tenants will be creative.
Generalized Fair Housing Policy
Though not required by law, it can be helpful to include a straightforward statement saying that you or your company follows the Fair Housing laws and guidelines. Fair Housing is the standard by which property managers, landlords and owners are upheld, so it helps to let your tenants know you do not discriminate based on race, color, religion, gender, disability, or national origin.
Fair enough? We know there’s a lot there, but even more fields are usually found on a rental agreement. However, these are the most important, and many landlords have gotten in trouble with these areas.
Now let’s talk about a few other things to consider in the rental contract paperwork.
Rental Agreement Mistakes to Watch Out for
A great article on Nolo.com points out a few things to watch out for. When it comes to your agreement, here are the main things to consider.
Don’t use generic lease or rental forms – sure, there are forms on the internet you can just download for free. But is that the best option? Probably not – you get what you pay for. You need to make sure the form you use is legal in your state. That doesn’t mean you need to pay an arm and a leg for it, but you should at least consider buying a template from someplace like Nolo.com or a local real estate lawyer’s site.
Watch out for discriminating verbiage – don’t include any fields on the rental agreement form that can be mistaken for a way to discriminate. Some, such as race or gender, may be obvious. But also consider things like asking if the tenant has kids. We all know that a family with kids may be more likely to do damage, but that’s not something you can ask about.
Don’t over-promise – be ready to honor anything the rental contract says you’ll do. For example, let’s say you promise to change the air filters every six months. If you don’t, you’ve technically breached the contract, giving the tenant something to call you out on.
Don’t violate the tenant’s privacy – the contract should indicate when, for what reasons, and how much advance notice you need to give a tenant before entering the home. Even though it’s your property, it’s a legal requirement in most states to keep these things in mind. This information should be in the contract, so it’s clear to both parties.
Now let’s wrap everything up by talking about a few other things you want to make sure you get from the renter before handing over the keys.
Other Documents You’ll Want Besides the Rental Agreement
Kudos to Sapling for putting a list of a few documents landlords should require before renting a home. Usually, you should obtain these before agreeing to sit down and sign the lease.
Proof of Income
Make sure the tenant can pay the monthly rent before letting them move in. It’s not uncommon to request at least the two most recent pay stubs from the tenant’s employer. Requesting their latest W2 isn’t a bad idea, either.
You can also ask for the employer’s contact information so you can check for yourself, but that’s not always possible, depending on the employer.
Try to get the contact information to contact the potential tenant’s previous landlords. If they have never rented before, there’s nothing you can do. But if they have, it’s worth contacting their previous landlords to see if they were good tenants.
Getting a background check for a potential tenant is highly encouraged. Otherwise, you never know who you may be signing that rental agreement with!
Property Inspection Checklist
Last but certainly not least, this little document is critical. If possible, you should fill this out with the tenant. I’ve been in rentals where the property manager basically had me fill it out on my own and took my word. But it’s better if the landlord or PM is there to be a second set of eyes in case the tenant misses something and to verify everything on the sheet.
The most important thing we can reiterate is to make sure your rental agreement complies with local laws. The best way to do that is to go through a lawyer or buy it from a store like nolo.com. But before you fill it out, make sure you read it thoroughly. That is a legally binding document, so it makes sense to take the time to scan it carefully.