To you, as a landlord, your lease is the most essential document in your rental property business. It outlines your and your tenant’s rights and responsibilities and is your first resource when questions arise. Additionally, a well-drafted agreement can provide critical protections for the landlord. Here are ten types of clauses to consider when drafting or revising your rental agreement:
1. Property Use. Just because tenants pay rent doesn’t mean they may use your property however they wish. Clearly prohibiting certain activities in your lease—such as running a business—can protect your property and provide legal recourse if problems surface.
2. Subleasing. Allowing a renter to sublet the property may spare you from finding a new tenant. On the other hand, housing an unscreened tenant with no lease responsibilities can lead to disaster. Therefore, your rental agreement should require landlord approval for subleasing so you can control who resides in your rental unit.
3. Guests. The more people who use your rental property, the greater the wear and tear. While you can’t prohibit your tenants from hosting guests, laying out some guidelines (such as the number of nights a guest may stay per month) can prevent problems. Stating that the tenant is responsible for any damage caused by occupants and visitors adds an extra layer of protection.
4. Renewal / Termination. Will the lease automatically renew if both parties agree? Can the landlord or tenant terminate the rental agreement before fulfilling the lease term? Does the tenant need to follow specific procedures when moving out? Planning for the end of the lease term will prevent confusion and ensure smoother transitions.
5. Utilities. Specify who must pay for utilities and consider including a reasonable usage cap to encourage conservation when their rent covers utilities. Additionally, state that the landlord isn’t responsible when a utility or service becomes unavailable through no fault of his own.
6. Inspections. Inspections are critical to promptly catching maintenance needs and ensuring tenants remain compliant with property rules. A lease provision that specifies the frequency of inspections preserves your right to perform regular inspections without conflict. Just respect your tenant’s privacy and comply with any local notice requirements.
7. Late Rent. Ensure your tenant knows when rent is due and how to pay it. In case of a late payment, lay out the consequences in advance. Do you allow a grace period? Will you charge a late fee? Clear expectations will ensure you receive the payments that make your business profitable.
8. Security Deposit. A clause detailing security deposits will keep you and your tenant on the same page at the beginning and end of the tenancy. Specify the amount of the security deposit, the circumstances that it may be withheld, and when you will refund it, if applicable.
9. Severability. You should ensure your lease complies with national, state, and local laws, but regulations can change. A severability clause specifies that the remainder of the lease will remain valid even if one clause inadvertently violates a law or ordinance.
10. Dispute Resolution. Disputes will inevitably arise during a tenancy and sometimes escalate beyond the scope of private settlement. If you’d prefer arbitration or mediation to a costly court battle, clarify your preferences in a dispute resolution clause.
No matter what terms you include in your lease, remember that the law won’t back you up unless those terms respect your tenant’s rights and comply with federal and local laws. A template may seem cost-effective in the short run, but most landlords find that a fair, compliant lease tailored to their property’s needs offers the best legal protection.
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Rentals America provides full-service property management for residential rental properties. Our team is completely dedicated to property management, and we’re here to help landlords navigate the rental market.
