Understanding and Preparing Leases and Rental Agreements
The written rental agreement or lease you sign with your tenant forms the foundation of your legal relationship. This document will establish the essential terms of the tenancy, such as rent, deposit, move-in date, whether the tenancy is month-to-month or a longer lease, pet policies, occupancy limits, and any other rules that will apply to the rental. It will also address ways in which the tenancy can end, either with the consent of both parties or based on violations of the terms of the agreement by either party. If you are preparing your own agreements or downloading forms from the Internet, it is critical to ensure that your documents conform to the laws in your state. Some of the most important aspects to consider when preparing leases and rental agreements are discussed below.
Monthly Rental Agreements vs. Leases
One of the first things to decide before offering your property for rent is whether you want to have a month-to-month rental agreement or fixed-term lease. Both types of agreements have their benefits and drawbacks, and you may find that, depending on the timing and the tenant, either one can be useful to you at different times.
Month-to-month rentals can offer more flexibility to both parties, and can be beneficial to landlords hoping to take advantage of rising rents in a housing market with a lot of tenants looking for housing. The downside of these agreements is that they can often lead to more turnover, which creates more work for you or your property manager if you have to find and screen new tenants on a regular basis. These shorter term rental agreements usually renew at 30-day intervals, though it is possible to contract for other periods of time. They often require 30 days’ notice from either party if they wish to end the tenancy, or if the landlord plans to raise the rent or change some other material condition of the agreement. State law can sometimes dictate longer notice periods and other requirements for changing a month-to-month tenancy.
A fixed-term lease typically covers a longer period of time such as 12 months or more. During the term of the lease, the tenant agrees to live in the rental unit and pay a certain amount of rent each month, and the landlord cannot compel the tenant to leave during that time period unless they have violated the terms of the lease. Leases can be ideal for tenants looking for long-term, stable housing situations, and for landlords who do not want to have to frequently find new tenants, perhaps if the property is located in an area where it can be hard to fill vacant rentals. At the end of the lease term the tenant can move out, the parties can enter into a new lease, or in many areas, the lease will roll over into a month-to-month agreement if the parties do nothing.
Basic Components of a Lease or Rental Agreement
While the specific contents of the written agreement you have with your tenant can vary based on the location or particulars of your property, a handful of key elements will be present in most cases. Leases and rental agreements should clearly identify all parties to the contract, and include any co-tenants or roommates, and whether any occupancy limits will apply to the rental unit. The rental premises should be identified, and the document should also describe any available common areas and who will be responsible for maintaining them. The agreement will specify whether it is a lease or month-to-month contract, the amount of rent to be paid and due date each month, late charges, who will pay utilities, last month’s rent, and the amount of the security deposit the tenant must pay to rent the apartment.
Limitations on Use and Behavior
Other key issues to address include whether there are any limits on use of the property, such as allowing only a certain number of days for guest stays, and whether a tenant is allowed to run a home business out of the property, which may or may not be permitted by zoning laws. Your lease or rental agreement should also discuss whether subletting or assignment will be allowed, and whether short-term rentals of the property will be permitted (this issue is often governed by local ordinances). Another issue to address is whether smoking will be banned in the unit, which can be advisable given the possibility of complaints from other tenants and fire risk. Some cities have begun to ban smoking in multifamily housing, so check any applicable local ordinances to see if your property is located in such a jurisdiction. Further, most agreements include an express prohibition on illegal activities on or near the premises, as well as on damaging the property, disturbing other tenants, or otherwise creating any sort of nuisance.
Pets should be specifically addressed in the lease or rental agreement, and it is permissible to prohibit animals in your rental property with the exception of service and emotional support animals used by tenants with disabilities. Permitting pets can make your rental unit attractive to some tenants, though pets can create a risk of damage to the property or liability for you if a tenant’s pet injures other tenants or guests on the premises. Your insurance policy may contain limitations on the type, size, or breed of pets allowed on your property. If you decide to allow pets, clearly specify any rules or limitations you wish to apply in this context, as well as the fact that dangerous pets will not be permitted to live in the rental.
Repairs and Maintenance
In your lease or rental agreement it is important to address your tenant’s obligation to keep the rental in good condition, as well as any rights the tenant will have to make improvements or repairs to the property. You may wish to prohibit this sort of work altogether unless you give consent, though exceptions can apply in some jurisdictions if a disabled tenant needs reasonable accommodations or a tenant makes repairs and deducts the costs from their rent. The lease or rental agreement should also address the tenant’s right to privacy, or “quiet enjoyment,” and specify the amount of notice you must provide before entering the rental unit in non-emergency situations, which is one or two days in most places.
Ending the Tenancy
An important issue your lease or rental agreement should address is when and how the tenancy will end. Again, monthly rental agreements usually require 30 days’ notice, and fixed-term leases set forth the end date of the tenancy. In cases where a tenant has failed to pay rent, damaged the property, refuses to leave, or has otherwise violated specific terms of your agreement, you may need to pursue an eviction. If you seek to evict a tenant, you must file and win a lawsuit against them in order to have them removed from the premises. Leases and rental agreements also generally articulate a tenant’s right to end the tenancy if the landlord violates the terms of the contract.
Attorney’s Fees and Costs
You may wish to include a clause in your lease or rental agreement regarding payment of attorney’s fees and costs in the event of a dispute regarding the agreement itself. In most states it is permissible to include a general requirement that the losing party in any such dispute will pay the other side’s attorney’s fees, and in fact many states will only award fees to the landlord if the agreement specifically allows for it. If you try to draft this provision to allow only for fees and costs for yourself if you win, courts in many states will still construe it as going both ways, meaning that you will pay your tenant’s costs and fees if they prevail. Note that a clause of this nature will not apply to disputes that are not about the agreement itself, such as discrimination complaints.