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As a property owner, it’s crucial that you craft a lease agreement.
Before leasing your property to a tenant, you want to ensure that you have an explicit lease agreement that states the responsibilities of both parties, as well as the policies, clauses, and disclosures governing their relationship. It will also be used as a reference point for procedures and courses of action surrounding specific situations.
Be sure that the document is signed by both you and your tenant. This is what will make it a legally binding document.
In this post, we are going over a basic guide to making a solid lease agreement.
Ways of Drafting a Lease Agreement
There are three ways of crafting a lease agreement:
- On your own
- With the help of an expert
- By following a template from other sources
If you’re a first-time landlord, we don’t suggest you formulate a lease agreement independently. This is because you are likely not well-versed with both state and local laws and regulations governing rental properties.
So, if you’re a new landlord, you should consider contacting a property expert. They are well-guided, equipped, and knowledgeable about property laws in the area.
You can get in touch with the team at Pinnacle Property Management for help.
Importance of a Lease Agreement
The successful management of rental space is defined by the adequate adherence to rules and obligations stated in the lease.
The following are some things that are stated in a lease agreement that help guide the landlord-tenant relationship.
A lease agreement:
- States the monthly rental amount. This reduces confusion and disagreements in the long run.
- Clarifies who's responsible for maintenance and repairs.
- Can save a landlord time and money.
- Responds to common questions and reduces the likelihood of your property policies being violated. Oral agreements, on the other hand, are quickly forgotten and vulnerable to alternative interpretations.
- Shields you in legal battles. It will be a good reference source to resolve conflicts that arise between landlords and tenants.
Elements of a Lease Agreement
Below are some of the common elements and details contained in a lease agreement.
1. Contact Details of Parties Involved
The name of the landlord and tenant(s) and the name of the rental property must be stated.
Also, the property address must be specific and complete, including the door number, if the rental unit is an apartment complex.
2. Rent Due Date
The agreement should specify the date on which rent payment will be due. This way, you will prevent any confusion and ensure tenants to pay on time.
3. Actual Rent Amount
The lease should clearly state the payable rent amount in figures and words. Additionally, they should be displayed separately if you’re charging other fees such as, parking fees.
4. Duration of the Lease
State the date in which the lease starts and expires.
5. Signatures of all Parties
The landlord and tenant need to affix their signatures on the leasing agreement.
The date that both parties sign the lease agreement should also be included. It acts as evidence that both parties have reached a clear understanding of the terms and conditions covered in the contract.
Essential Clauses and Policies of a Lease Agreement
Based on the landlord's choices, decisions, and preferences, each lease agreement will have different policies.
Clauses, on the other hand, tend to remain the same on all lease agreements as they must comply with state legislation.
To give you an idea, below are some terms:
1. Subletting
Subletting allows a tenant to share the rent payment with additional renters.
If you want to have more direct control over identifying your property's inhabitants, settle on your subletting policy.
If you're more flexible, you can enable the renter to sublet if they submit a formal request to you first.
2. Access to the Property
Respecting a tenant's right to enjoy the rented area in peace is critical. Specify the criteria under which a landlord can acquire access to the property. If no precise time frame is specified, you must state a suitable time frame.
3. Tenant Responsibilities
Landlords are required to make their rental premises habitable for tenants. This can be as simple as dumping trash into suitable receptacles and keeping a decent level of peace on the site. Tenants, like landlords, have their own responsibilities to meet.
These responsibilities must be stated in the lease agreement.
4. Breach of the Lease
You must state when a tenant is legally allowed to break their lease.
Some of the reasons for legal termination of the lease includes if your tenant is on active duty in the military, if they’re a victim of domestic abuse, or if they have been subjected to landlord harassment.
If you allow early termination of a lease agreement for reasons such as job relocation, the lease should state so.
5. Security Deposit
It is the renter’s right under state laws to be informed of where their security deposits are kept. If the deposit is held in an interest-bearing account, they should also be informed of the amount of interest it earns.
The security deposit refund method is should be well-detailed in the leasing agreement to avoid future problems when the tenancy expires.
Closing Thoughts
Renters and landlords will avoid future issues if they have a clear, concise lease agreement.
The lease should include everything that will help you have a smooth tenancy. While putting together a proper lease agreement may seem daunting at first, understanding what to include in it makes the process much easier.
If you’re new to the industry or looking for extra expert help, hire a trustworthy and skilled property manager.
Contact Pinnacle Property Management for all your property management needs!
