Key Takeaways
- A lease agreement defines the rights, responsibilities, and expectations of both property owners and residents while minimizing legal risks.
- By clearly outlining policies and procedures, it helps avoid misunderstandings and promotes a smooth property owner-resident relationship.
- Names of parties, property descriptions, lease terms, rent details, fees, and signatures are fundamental lease components.
- Provisions covering subletting, repairs, property access, illegal activity, pets and other obligations ensure better management and enforcement of rental rules.
A good lease agreement is the foundational document every rental property owner needs when renting out their property.
The lease agreement serves as the roadmap to help both owners and residents navigate the issues and conflicts that may arise in a rental property.
Before renting out their property, every property owner should think of the problems that can happen in their rental and ensure that the lease agreement fully covers these issues.
Without this step, you will be leaving room for avoidable disputes that can sour your relationship with the residents in your rental property.
With a detailed lease, however, you offer your residents an accessible, transparent, and predictable framework for resolving conflicts. They can refer to the lease to know what they can expect from the owner in any given situation.
A good lease promotes harmony by ensuring concurrence between renters’ expectations and the policies of the rental.
How do you create a good lease agreement for your rental property? This guide by Peabody Residential discusses the key elements that should be present in a good lease agreement.
It explains why you need a lease agreement, the basic information that should be in the lease, plus all the critical clauses to include in this all-important document.
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What is a Lease Agreement and Why Do You Need it?
A lease is a legally binding contract between the owner of a rental property and the person leasing it. It defines the key terms of the relationship, outlining what each party is entitled to, as well as their roles and responsibilities.
As the owner of a rental property, you need a good lease agreement because:
- The lease provides clarity: By defining the terms of the agreement, this document ensures that no aspect of the contract is subject to personal interpretation.
- It offers legal protection: A good lease minimizes the risk of legal liability for both the owner of the property and the residents of the rental.
- It defines roles and responsibilities: By defining each party’s role, the lease lays the groundwork for the seamless operation of the rental.
- Ensures financial security: The lease provides clarity on the rent amount, due date, late fees, and security deposit handling.
- Promotes a cordial relationship: The lease promotes harmonious relationships by anticipating and solving the potential issues that can happen in a rental.
- Enables enforcement: By spelling out the rules beforehand, a good lease agreement provides the basis for enforcing the rules and policies of the rental.
Basic Information That Should Be in the Lease
What are the primary details that should be in every lease agreement?
Names of Parties Involved
The full names of the property owner and renter should be in the lease. The names of every adult who will live in the rental unit should also be included in the lease. This makes the lease terms legally binding on them.
Description of Property
The description of the premises must include the full address of the building, the unit number, square footage, detailed boundaries, and included amenities, such as parking and storage spaces.
Term of the Tenancy
The lease should state whether the contract is a fixed-term lease or a rental agreement that self-renews if it is not terminated by either party. It should also state the start and end dates of the lease.
Details of the Rent
The expected details here are the rent amount, the rent due date (typically the first day of the month), accepted payment methods, grace period (if any), late fees (if applicable), and charges if a check bounces.
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Deposits and Fees
The security deposit amount, details of the bank account where the security deposit will be held, how the security deposit may be used, and when it will be returned. If there are any non-refundable fees, they should be stated.
Signatures of All Parties
The lease agreement doesn’t come into effect until it has been signed by all parties. By signing the lease, each person confirms that they understand and agree to the terms of the contract.
Critical Clauses to Include in the Lease
Clauses are provisions in a lease that cover the rights, responsibilities, and obligations of owners and residents in a specific area of the rental or relationship. They are subsections that are dedicated to key issues in the contract.
Some of the key clauses you should have in your lease agreement include;
Subletting
Provisions against subletting ensure that residents can’t take in other renters into the property. This helps owners retain control over who can live in their rental. Some owners permit subletting, but only after they give their written consent.
Repairs & Maintenance
This clause facilitates prompt reporting of repairs by residents. It outlines the procedures for requesting repairs and for resolving those problems. It imposes restrictions on the modification and alteration of the property by residents.
Property Access
This clause balances residents’ right to quiet enjoyment of the space with the owner’s right to enter the rental unit. It outlines the conditions under which the owner can enter the home for repairs, inspections, showings, or emergencies.
Resident’s Illegal Activity
A clause against disruptive behaviors in the building or the use of the rental for illegal activities helps to ensure the comfort/safety of residents and neighbors. It prevents property damage and shields the owner from lawsuits.
Pets
If pets are not allowed in the rental, the lease must state it clearly. If pets are allowed, it must state specific restrictions on size, type, breed, weight, and number, along with the pet owner’s responsibility for damage, noise, hygiene, and vaccinations.
Other important clauses to include are resident obligations, conditions for breaking the lease, security deposits, and any provisions that address the peculiar needs of the rental.
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Final Thoughts
The best option for most property owners is to work with a reputable property management company.
An experienced property manager knows the potential problems that can happen in a rental and has an arsenal of tools and strategies for handling them. This wealth of knowledge will come in handy when drafting a lease agreement for your rental property.
If you have more questions about drafting a lease agreement contact Peabody Residential today for your property management needs!