A lease agreement is a legally binding contract that protects both the landlord and tenant by outlining what both parties are responsible for and entitled to. Not knowing which clauses to include can be disastrous for all parties involved, or at the very least, result in disputes and misunderstandings, so being thorough is critical.
Writing a comprehensive lease agreement means covering everything that concerns the landlord, the rental property, and the tenant. Apart from the lease rules you want to add that are specific to your rental business, here are some you simply should not skip.
Key Highlights:
- Clear lease terms reduce disputes by defining responsibilities, rights, and expectations for both parties.
- Transparent financial clauses cover rent, payment rules, late fees, and security deposits.
- Defined maintenance, utilities, and access rules protect the property while respecting tenant privacy.
- Termination, alteration, and subletting clauses help prevent legal and operational issues.
- Protective clauses like force majeure and severability keep the lease enforceable during unexpected events.
Lease Term and Renewal Options
This clause should specify the start and end dates of the lease, the conditions for renewal or extension, and the type of lease the tenant is going to sign. For residential lease agreements, in particular, you need to indicate whether the lease is fixed-term or month-to-month.
As for lease renewals, the contract should outline when and how they can continue their tenancy. You can even include the lease incentives that come with renewals, or remove the option to extend leases altogether. Being clear on these terms will prevent potential vacancies in the future.
Rent Payment Details and Amount
The agreement should outline how much rent a tenant owes per lease term, rent payment details, and the due date for each term. Include acceptable payment methods so you can discuss them with your tenants and adjust accordingly if they cannot access the payment channels used.
Furthermore, policies for overdue rent, such as late fees, grace periods, and penalties, should be included. This shows your tenants that you are transparent about your rules, rather than issuing consequences without prior negotiation when they fail to pay rent.
Security Deposit
A comprehensive security deposit clause should explain the amount required from the tenant, the conditions for deducting from the security deposit, and the timeline and method for returning the deposit.
This protects the landlord while assuring tenants that their deposit will be returned. You should include what kind of damages would warrant the use of the security deposit to prevent disputes.
Rental Unit Maintenance and Repair
Both the landlord and the tenant have maintenance responsibilities for the rental unit, and it's easy to get confused when the tenant's responsibilities are not clearly stated. Naturally, landlords will handle routine maintenance and damages brought by normal wear and tear.
Excessive damage, however, should be resolved by the tenant. The landlord can also help conduct repairs, provided that the tenant covers the fees by paying or through the security deposit. Always check your local laws about the security deposit before creating a lease clause.
Utility Bills
Your lease or rental agreement should include who would cover the utility bills. In most arrangements, the tenant pays the utility bills, but you can also include them in the monthly rent.
The clause should mention that the utility expenses should only cover the leased premises. It shows that you only charge the tenant for the energy or other utilities they consume, helping property owners be more transparent.
Entry and Access
While this rule typically provides you with clear schedules and accessibility, adding this to your lease or rental agreement clauses also gives your tenants a sense of security, since they can be sure that they have their privacy.
Add details such as when and how you may enter the property, how much notice you're expected to give, and what qualifies as emergency access within the leased premises. It has to be balanced between respecting tenant privacy and protecting your rental property.
Lease Termination
A lease termination clause in the lease agreement determines the grounds for evicting a tenant. This doesn't necessarily have to be limited to lease violations. You can also include how you have the right to refuse renewal when their lease ends, which falls under the surrender of premises clause.
An early termination clause also informs your tenant what the proper notice requirements are to ensure a smooth transition during the unexpected vacancy. A lease breakage clause in your rental agreement prevents potential disputes in the future.
Alterations and Improvements
Your lease agreement should clearly state what kind of changes your tenant can make to the property. Any changes or upgrades, such as minor renovations, may be difficult to reverse once they leave the property.
You can require them to submit formal requests to make changes, or be obligated to restore the rental premises to its original appearance before they moved in. If the tenant violates the rule, you can state that restoration expenses can also be deducted from the security deposit.
Force Majeure Clause
This lease agreement clause excuses all parties involved from fulfilling rental contract obligations due to unforeseen and uncontrollable circumstances, such as natural disasters, epidemics, or government actions. This frees you from your landlord responsibilities amidst difficult situations, as well as keeps you from violating landlord-tenant laws.
Subletting Rules
Since a lease or rental agreement is a legal document, adding a third party to the arrangement can become messy quickly. If they intend to rent rooms for residential purposes, you can require a written consent from you before they can sublet your rental.
Severability Clause
This is arguably one of the most essential clauses you can add to protect your rental real estate. It's a safety net for you, should a court find one part of the contract unenforceable. To make it simple, this critical clause will not nullify your entire contract if one provision becomes invalid. Every real estate attorney would advise you to add this to protect yourself and your property.
Lease Agreement Clauses FAQs
What are the most important clauses I should include in the lease agreement?
- The key clauses you should add to a simple lease agreement are the rent amount, payment methods, due date for collecting rent, property address, name of the landlord or property manager, name of the tenant, and lease term.
Who can I consult to create a legally secure lease or rental agreement?
- Seeking professional assistance from a real estate lawyer or a property management company can help you draft a lease document that abides by landlord-tenant laws, all while staying fair for all parties involved.
Can I digitize my lease agreement?
- While you can digitize your lease agreement, it's better to have a physical document, since it serves as tangible evidence for legal disputes.
Let Us Create and Enforce Your Lease
What you include in your lease can significantly affect how your rental operations run, so you must cover every rule that protects both the landlord and tenant, as well as your investment property.
Just as CRM Properties can help you draft a comprehensive lease, we can also enforce your rules to maximize your rental income.
We can do so much more for your rental property, so Call Us and learn more about our services!