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“What Should Be In A Lease Agreement?”

Are you familiar with what should be included in a lease agreement?

There are a lot of different components within a good lease agreement.  A property manager is ultimately responsible for what is in the lease agreement. The lease agreement will set the rules and responsibilities that are needed to be followed by both the tenants and the property manager during a lease term.

To help you have a better lease agreement, I’m going to take the time to tell you what to consider for your lease agreement.

What To Include In A Lease Agreement

Before we dive into what to include in a lease agreement, let’s first talk about what is a lease agreement.

What Should Be In A Lease AgreementWhat Is A Lease Agreement?

A lease agreement is a contract between the lessor (person leasing the property) and the lessee (person or group making the property available for lease). The contract states that the lessee has been granted the right to use the property of the lessor. Sometimes, it can be a property that is managed by the lessor which means that the person leasing the property is managing the property, like a superintendent for example.

The agreement does not state that ownership of the property has been granted to the lessee. However, the lessor can grant certain modifications or changes on the property to adapt to the needs of the lessee.

During the course of the lease period, the lessee is then held responsible for the condition of the property of the lessor. Although the lessee is responsible for the property, it is up to the property manager to run inspections of the rental unit from time to time. That’s why there should also be a clause in the lease agreement that pertains to the right of the property manager to run inspections and the day of notice needed for the property manager notify the tenants about the inspection.

The lease agreement also outlines and details the responsibilities and obligations of the lessor and the lessee. The agreement explains all the terms that the lessor and the lessee have agreed upon. It will also discuss all the details regarding the payments and the length of the lease of the lessee.

A lease agreement is important because it governs what the lessor and the lessee can and cannot do during the course of the lease. The agreement serves as a legal, and a binding contract between the two parties. This contract can be used by the court if any legal proceedings arise between the lessor and the lessee.

Not that the lease agreement can’t override local, state, or federal laws.  Those always take precedence.

What Should Be Included In A Lease Agreement

Now that we have discussed “what is a lease agreement”, let’s talk about what to be included in a lease agreement.

I have outlined the most important details that should be included in the agreement.

The Basic Details

Let’s start off with the basics… the name of the lessee and lessor is included in the lease agreement. If there are other people living with the lessee, then the names of those people should also all be included.

If you are allowing pets in your property, then the description of the lessee’s pets should be added.

The property manager should also describe the rental property subject for leasing. This should include:

   The house number.

   The street name.

   The apartment number the lessee/tenant is going to rent.

   The town.

   The state.

   The postal code.

A clause for the term of the lease should also be included. Specify whether it’s a fixed-term or a month-to-month term.

A month-to-month term may start on the first with an end date. A fixed term can be an automatic continuing lease that will remain in full force and effect. The term of the lease shows when the contract is valid. Often a lease agreement will begin month-to-month and have an end date clause that states if not renewed it will continue as a month-to month.  

Make sure to specify the exact date (day, month, and year) the lease will start and the date when it will end.

Rent And Security Deposit Details

The lease agreement should specify the rent to be paid by the lessee and when it is due. The lease agreement should also state where and how (check, withdrawal, or cash) the rent must be paid.

Fees for late payments should also be included on the lease agreement.  This will help prevent any future confusion or misunderstandings in the future whenever the tenant fails to pay the rent on time.

The lease agreement should also specify the security deposit and how much interest is held. Details about the security deposit should be described with regards to how it will be managed if there are damages and expenses that the tenant is responsible.  This may include but not limited to furnishings, and repair costs.

The security deposit (plus the interest in some states) less the payments to damages should be returned at the end of the lease. In some States you can include costs expected to be taken out of the security deposit to cover these costs at the end of the lease term.  

When entering into or developing a lease agreement for your property management business it is best to consult with and have documents reviewed with your real estate lawyer. The laws governing security deposits laws and regulations vary from state to state and may cause a problem if not handled correctly. This is why property managers should also consult and be familiar with the state laws regarding security deposit.

Repair And Maintenance Responsibilities

All respective duties of the lessee and the lessor should be included in the agreement. Specify the responsibility of the lessee or the lessor to pay for the repairs of the property. In some cases, when the damage was caused by natural disasters, the lessor (property owner) shoulders the repairs that need to be done.

Itemize the appliances and items that are part of the lease. Describe the conditions of the items whether there is any defect and who is responsible for repairing or maintaining the defect. Note any special considerations with regards to the items you itemized. Normally household appliances are the responsibility to maintain of the lessor, unless the lessee has brought the appliances with them. Make sure your lease agreement specifies ownership and responsibilities to avoid future misunderstandings.

If there are any house rules, be sure to include them and get them agreed to in the lease agreement. Some of the house rules may be the maintenance of the property, keeping the home and property clean, noise control, and similar responsibilities.

What Should Be In A Lease AgreementTermination & Unpaid Rent

There will always be a possibility of a breach in contract.  So it’s important that you have a clause or two that states the process or the consequences if one of the parties breaches the contract.

Some of the causes of breach in contract may include unpaid rent, consecutive or continued late rents, and or the lessor being unable to maintain a habitable property. Unpaid rent is a good basis for evictions. But it’s important that you know all the rules regarding eviction before doing it… or you might end up seeing yourself on the wrong side of the table. A property manager could not just evict a tenant instantly. There is a process in doing so and a property manager should consult the state laws regarding the processes in evicting tenants.

If a tenant is subject to eviction, there’s a high possibility for the lease agreement to be terminated. However the lease agreement will be the primary document court’s review and rule on in an eviction process. Termination of the lease agreement may then occur at the end of a non-continuing lease. It’s best that you know your state’s rules when it comes to terminating a lease. Include the details of the termination of your agreement so your lessee will be informed.

Final Thoughts On What To Include In A Lease Agreement

Understand the components of a good lease agreement is very important. The agreement is a binding contract between a lessee and a lessor. The contract will be a good tool to use when legal actions arise between you and your tenant. Make sure that before a tenants sign the lease agreement, and that the tenants understand all the terms that are stated in the lease agreement.

If you have any questions or thoughts about lease agreements, please feel free to comment below.

 

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3. The Usage Of Eviction Letter

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ARTICLE: What Should Be In A Lease Agreement?