Do You Know How to Create a Lease?

You found people to rent your property, and you had them fill out your Lease Application. They met your criteria, and the verifications all checked out.  Now it’s time to present the Lease or Rental Agreement.  In some states, rental agreements with a term of 12-months or more have to be in writing in order to be enforceable.  Does that mean it’s possible to forgo the written agreement for terms less than one year?  Possible, yes.  Prudent, no!

If you and the tenant have a verbal agreement and each remembers and holds up to what they agreed to, there would not be a problem.  However, without the signed, written terms, how would either party prove what was agreed to when standing in front of a judge over a dispute?  In the absence of a written agreement, a judge would decide based on landlord-tenant law applicable in that jurisdiction.

Having a lease provides written permission to manage the relationship and expectations that both parties agree to abide by.  If there is a dispute, a judge would be able to interpret the intentions of both parties by what is contained in the signed contract.  In addition to stating terms about the rental amount, the length of the rental term and how terminations and renewals will be handled, the lease agreement also outlines which utilities are included/excluded, what the policy is regarding things like subletting, adding occupants, keeping pets and having renters’ insurance. The lease tells us under what conditions security deposits will be returned or what may be deducted.  It should stipulate what happens if a check bounces, if rent is habitually late, and much more.

If a tenant is not acting in harmony with what they agreed to in the lease, the terms of the lease can be quoted in warning letters to remind them it is a condition they agreed to from the start.  This can be a helpful management tool when you would rather get their compliance and not seek an eviction.  If it is an eviction you are seeking, the lease agreement provides the means for pointing out the violations and the basis for granting the eviction.

Standard leases may also require riders (attachments of additional terms) for things like lead paint disclosures for properties built before 1978, or an addendum such as a garage rental or an option to purchase the property. Anything that spells out the additional terms required for the topic being added is a rider.

It is a good idea for your legal team to review what you intend to use as standard documents to be sure they protect your interests as a landlord and comply with any state or local laws.  Check your state’s attorney general website for information about landlord-tenant laws.  There is usually a booklet available for tenants.  Be sure you are familiar with it too. If you are not sure about the meaning of something you find there, ask your legal team for clarification.

Managing your landlord-tenant relationship by spelling out the agreement in advance with a written lease is a wise investment of your time for the success of your real estate business.