The best offense is a good defense, right?
Think of a property management lease agreement as a really strong defense. The more problems you foresee (and prevent) with your contract at the beginning, the better the rental situation.
But, without a background in real estate or rental laws, it’s easy to overlook some crucial components of a great lease agreement. So, to help you out, here are 7 must-haves every property management lease should contain.
1. A Lease Term
The lease term is the agreed time frame the tenant commits to live in a property. It keeps the tenant in the property for a reasonable number of months and lets you know when to start looking for a new tenant. Tenant turnover demands a lot of work from a landlord, so it’s best to plan accordingly to make the process as smooth as possible.
2. Payment Dates
When is rent due? When is it considered late? Leave no room for misunderstandings in the lease. Include a clear due date as well as an explanation of what happens if they don’t pay. Make sure they know what fees to expect with late payments and what forms of payment you’ll accept. Usually, personal checks and electronic payments aren’t accepted late. Our policy for late rent requires tenants to pay by cashier’s check or money order.
3. Breach of Lease
This section of the lease explains what is considered a breach of lease and the consequent the actions for violations. This keeps both the tenant and the property manager on the same page so everyone understands the rules and penalties. Then, if violations happen, the landlord just follows protocol.
4. Property Showing Terms
Once a tenant gives notice, how will the re-listing process work? Explain how soon you’ll list it and the current tenant’s obligations for showing the property. Then, the tenant knows what to expect during the last month of their lease and the owner can pre-lease the property with as few vacant days as possible.
5. Subleasing Terms
If a tenant leaves unexpectedly, they’re in breach of the lease. But with clear terms in the contract, you can give them the option to request a sublease if they move out early. Then, they find another tenant for the duration of their term. But they can’t choose just any random person. Clearly explain the process for subleasing and put any new tenant through the full approval process.
6. Names of Occupants
Be clear on your expectations of occupants from the beginning. You need to know who plans on living the house and need the names of anyone who moves in later. You don’t want unknown “guests” in the house for more than seven days. After seven days, they’re considered an unknown occupants. So explain the limits on occupancy and your expectation for them to communicate the names of the people who stay for longer than a week.
7. Landlord-Tenant Responsibilities
Utilities and repairs — who’s taking care of them? Before you sign the lease, you need to make sure both parties understand who’s responsible for what. Then explain what “taking responsibility” for that item means. For example, will the tenant or landlord manage landscaping? Does that mean mowing weekly, trimming bushes, pulling weeds? To get rid of any doubts, include a detailed explanation in the lease of how utilities, repairs, and maintenance issues will be handled and by whom.
Set yourself up for success with a air-tight lease. Communicate clear expectations in your lease so you leave nothing up for debate. You’ll avoid a lot of problems and know how to handle the ones that happen anyway.