Renting out a property is one of the easiest ways to grow your wealth over time, but it comes with risks. Luckily, you keep your investment safe by drafting a strong lease agreement. Creating a solid lease agreement is essential for both landlords and tenants as it sets clear expectations, outlines responsibilities, and helps prevent disputes.
Drafting a lease agreement can seem like a daunting task but it doesn't have to be. In this comprehensive guide, our experts at Harper Property Management will go over everything you should know for drafting good lease agreements.
Elements Involved in Drafting a Lease
Here's a step-by-step guide to drafting a solid lease agreement:
Understand Local Rental Laws
You should take the time to familiarize yourself with your local landlord-tenant laws before even listing your property for rent. There are a number of building codes and rental regulations you must comply with as a landlord. If your lease doesn’t comply with local and federal laws, you could face financial and legal consequences.
Before drafting your lease agreement, make sure you understand the rental laws specific to your city or county. Pay close attention to unique regulations regarding rent control, security deposits, required disclosures, and eviction procedures. Furthermore, remain up-to-date on all these policies as they are subject to change.
Gather Important Information
Before sitting down to draft your lease, you must ensure that you have all the information you need from tenants, such as their full name, contact information, and current address. Likewise, if you’re working with a property manager, you should also include their name and contact information on the lease agreement .
Write Down Relevant Information About the Property
Your lease agreement should also include basic information about the property you’re renting. So, make sure to write down the property’s complete address. Additionally, you must include a description of the rental, specifying the type of property, square footage, layout, and any included amenities, such as parking spaces and storage units.
Define the Lease Term
Before you start drafting your lease agreement, you need to define the terms of the tenancy. Is it going to be a fixed-term or a month-to-month lease? Either way, you should specify the start and end dates, as well as any options for lease renewal or extension, including notice requirements and potential rent adjustments.
Set the Rent Amount
Your lease agreement should clearly state the rent amount, the specific due date for rent payments, and acceptable payment methods. Additionally, you should disclose any late fees or penalties for overdue rent, including the amount and when they will be applied.
Set Rules for Security Deposit Refunds
To ensure compliance with your local laws and avoid disputes in the future, you must clearly state the terms for security deposits. Your lease should state the security deposit amount and how it may be used. Additionally, you should outline the process and timeline for returning the security deposit at the end of the lease, including any deductions and required documentation.
Outline Maintenance and Repair Responsibilities
Keeping a property in good condition is a shared responsibility between landlords and tenants. To avoid misunderstandings and disputes, you should specify tenants’ responsibilities regarding property maintenance. Provide instructions for submitting maintenance requests, including contact information and expected response times.
Disclose Early Lease Termination Policies
Tenants and landlords can break a lease early under several conditions, such as active military duty and unsafe living conditions.
Describe the conditions under which the lease can be terminated early by either party, including notice requirements and potential penalties. Additionally, make sure to explain the consequences of breaking the lease early, such as forfeiture of the security deposit or financial responsibility for the remaining rent.
Disclose Important Rules and Regulations
Setting clear expectations from the get-go is crucial for a stress-free tenancy. That’s why your lease should detail any specific rules tenants must follow, such as noise restrictions, parking rules, and smoking policies. You should also explain the consequences of violating property rules, including potential fines or even early lease termination.
Include Additional Clauses
A well-drafted lease should outline the expectations and responsibilities of tenants. To avoid disputes later on, it’s best to cover as many topics as possible on the lease. This includes:
- Subletting: State whether subletting is allowed and outline any requirements or restrictions.
- Alterations: Detail whether tenants are allowed to make alterations to the property and any conditions for doing so.
- Insurance: If you require tenants to obtain renter’s insurance and provide proof of coverage, you should outline it in the lease.
- Occupancy Limits: State the maximum number of occupants allowed in the rental unit.
- Guest Policies: Outline any restrictions on guests, including duration of stay and notification requirements.
- Pet Policies: Specify whether pets are allowed. If so, outline any restrictions and any additional fees or deposits tenants must abide by.
Review and Sign
Once you’ve drafted your lease agreement, take the time to carefully proofread it for any errors or omissions and to ensure all terms are clear. Once you’re done, meet with tenants to go over the terms and sign the lease. Some jurisdictions require witnesses or notarization. So, you’ll have to check your local laws to determine if this is necessary.
Bottom Line
Drafting a strong lease agreement involves a deep understanding of legal requirements and the ability to communicate expectations clearly. By following the steps outlined above, you will be able to draft a comprehensive lease that protects your interests and fosters a positive landlord-tenant relationship.
If you’re unsure whether your lease complies with all relevant laws and addresses specific concerns related to your property, contact Harper Property Management! Our property management team can help you draft a solid lease.
