A solid lease is one of the keys to being successful as a landlord. It will clearly define both the tenant’s and the landlord’s roles. So what makes a solid lease? Here are my top ten components
- Make sure it is written. Seems simple enough but I have heard more than just a few times of people not having a written lease. If you do not write it down, how will you prove to a judge what the terms were? It will come down to he said/she said. Have a written lease!
- State the monthly rental amount and late fees upfront and in bold. Have the tenant initial next to these amounts.
- State clearly when the rent is due. Put it in bold and have the tenant initial next to it.
- State the amount of the security deposit. You may want to have another form letting the tenant know what they have to do to get it back in full.
- Set a term for the lease. Will the lease be for six months, a year, two? What ever it is set the term and then make it go month to month at the end of that term.
- Outline who is responsible for what utilities. Clearly spell out the utilities that the tenant and the landlord are responsible for.
- Have a set of house rules about noise, trash, cars on the lawn, criminal activity, etc, etc.
- List what appliances come with the property. You may even want to list serial numbers on the lease.
- If your property was built before 1978, have a lead based paint disclaimer and be sure to hand out the lead based paint brochure. It could be a $20,000 fine if you do not!
- Include any clauses that may be required by your state or local jurisdiction. Laws vary from place to place. In my location the laws are completely different from one county next door. Be aware of your local laws and seek competent advice on them!
You may want to take the time to have an experienced attorney look over your lease. I have and it really helps. Also, ask folks at your local REIA group if they will share copies of their lease with you. Everyone’s lease is a little bit different and you can tailor one to fit your needs.
Finally, your lease should be a “living” document. You should change it as you experience new issues or laws change. Review it every once in a while to be sure it is keeping up with your needs.
Happy investing and work smarter not harder!
