Have you ever tried to play a game without any rules? It probably didn’t work out so well.
Part of playing a game that actually works is clearly laying out rules for everyone to follow. Without solid guidelines, someone gets mad, misunderstands, or violates some unspoken rule that the other person assumed.
Think of a lease agreement like the rules of the game. Without the regulations, the game falls apart. Part of making sure everybody follows the rules is stating them clearly at the beginning. The best way to do so is with an effective rental lease agreement. Without it, you don’t have much to enforce.
The lease agreement is the backbone of your relationship with the tenant. It’s a legal framework for how you interact, what you’re each allowed to do, and what happens if you don’t.
Do you really want to trust a $5 online template for that?
Essential Components of a Lease Agreement
Some parts of an agreement are standard, but they’re not always explained in full detail in the basic lease template. So, as you form your lease, make sure to include each of these items:
- Parties to the Lease. List the name of the landlord and tenant bound to the agreement.
- Description of the Property. List the address of the property. You can also provide a basic description of the property.
- Terms of Rent. How much does the tenant owe per month? Explain what forms of payment are accepted, to whom they should send their monthly payment, when it’s considered late, and an explanation of late fees.
- Lease Term. How long is the lease and when can it be terminated?
- Occupants. Who will regularly occupy the property? Make sure you have the names of each person who will occupy the house written in the lease.
- Security Deposit Information. How much does the renter pay? How do they pay? What are the terms of returning the deposit?
- Damages and Repairs. Who’s responsible for making repairs? What’s the current condition of the property? If the tenant needs a repair, explain the process of submitting a request.
- Pets. Are pets allowed? If so, is there an approval process?
- Right of Entry. Include a clause that allows the landlord to enter and inspect the property with reasonable notice.
Other parts of a lease are elective. Here’s what we recommend including in the lease in addition to your standard terms.
Early Termination Subletting Process: What happens if the lease is terminated before expiration? Decide if you want to allow a tenant to sublet the property. If so, clearly state the process for finding a new tenant. We recommend the new tenant be subject to your approval — and your full screening process. Check out this post for more information on subletting.
Authority to Relist the Property: When a tenant’s lease is up, you want to find your next occupant as soon as possible. So state how many days before the current tenant’s move-out date you can list property for lease. We recommend listing it the last 30 days of the current tenant’s lease.
If you don’t include it, they don’t have to accommodate showings to future tenants. Then you’ll likely lose a month of rent because you can’t start the re-listing process until their lease is up.
Selecting Your Lease Agreement
As you form your lease agreement, remember that your state matters. Each state holds specific laws that guide this tenant/landlord agreement. If you live in Texas, but copy a template from California, you’ll find discrepancies between state-specific laws and clauses.
TIP: Make sure you worked with legal counsel from your state to craft a document that follows your state-specific laws while effectively protecting your investment.
If you already have a lease agreement, double-check it. It’s not too late to make it more effective. Look for each item we’ve covered to make sure you’ve addressed it with your tenant. If you find something wrong, just give us a call. We can help you follow the right steps to establishing a lease that protects you, your tenant, and your property.