The definition of a lease or rental agreement is a document that outlines the rules, terms and conditions tenants must agree to follow in their rental relationship with a landlord.
While it is a legal contract, it is also a practical document that contains a plethora of crucial business information, such as the length of time in which the tenant can remain living in the property, as well as the amount of rent owed each month.
There is no maximum or minimum page limit on the lease or rental agreement, but it must be comprehensive enough to cover the most important terms of the tenancy, for both landlords and tenants peace of mind.
Below, we’ll share the 8 most crucial things to ensure are contained within your lease agreement.
The Names of All Tenants
It sounds obvious, but each tenant must be listed so that they can be held legally responsible for terms such as paying rent and the comprehensive use of the property.
Make sure every adult who will be occupying the rental unit is listed and ensure to include both members of a married or unmarried couple. Not only should everyone present be named as tenants, they should also individually sign the lease agreement.
These legalities mean that in the case of a violation of a critical term of the agreement, the tenancy can be terminated for all tenants on the lease or rental agreement. It also safeguards the collection of rent, as if one tenant is refusing to pay, you have the grounds to legally extract that rent.
Any Limits on Occupancy
Your rental or tenancy agreement should always clearly specify that your rental unit or property is solely the residence of the tenants who are present on the lease and any of their children who are legally classed as minors.
This stipulation guarantees your renters right to make determinations as to who lives on your property. The most important benefit of this clause is that if a tenant decides to move in their partner – who has not been screened, nor approved – they could be evicted in breach of the tenacy rules and agreements, especially if perhaps they are displaying challenging or problematic behavior.
It also prevents the subletting of your property without giving explicit permission, making it safe to go on vacation and not worry about coming back to a disaster scenario.
Terms of the Lease
Perhaps the most important tenancy provision of them all. Each rental or tenancy agreement should clearly state whether it is a rental agreement or whether it is a fixed term lease.
Rental agreements run from month to month, usually for periods of between three and six-month rollovers, unless terminated within that time by either the tenant or the landlord.
On the other hand, rental leases typically last for a year and the determination of how long the unit is occupied is agreed between the landlord and tenant depending on how much flexibility is desired from either side. This lease usually rolls over without the need to sign a new contract, and will run until either the tenant or landlord chooses to end the agreement for whatever reason.
Make sure your rental or tenancy agreement clearly lays out these options for renewal on the expiry date of a fixed term lease. Termination options and clauses should also be agreed, discussed and addressed.
Another vital clause, this should be one of the first things assessed in any lease agreement and should have been discussed beforehand.
Any lease or rental agreement must specify not only the amount of rent due, but when it is due (whether the first or end of the month), and any preferences on how it should be paid, such as by check, credit card or mailed to an office.
It is also advisable to check for acceptable payment methods, as well as any guidelines around late fees. If the rent is unable to be paid on time, the agreement should state whether or not a grace period is acceptable, and should also cover whether there will be any charges if a rent check is to bounce.
Likewise, for a variety of reasons, it is possible for rent amounts to fluctuate over time. Factors could include rising utility costs or the property falling into a different tax band. Depending on the tenancy or rental agreement signed, how these rent increases will impact tenants should be clearly stated and outlaid as well as a clear indicator that a written notice of Notice of Rent Increase will be provided prior to any such increase occurring.
Deposits and Fees
The most contentious clause of them all, miscommunications between tenants and landlords can often cause the subject of fees and deposits to become a fractious issue.
In your tenancy or lease agreement, make sure you avoid any awkward or challenging conversations down the road by clearly stating the amount of the deposit required (in accordance with state laws) and any terms or conditions surrounding it.
Terms and conditions around how the deposit is used may include sub clauses such as on a landlord’s side, accessing the deposit for any damage repair incurred or preventing a tenant from using part of the deposit to apply it to a month’s rent.
Make sure the agreements clearly state when and how the deposit will be returned when the tenant moves out, and the reasoning behind any evident deductions, for example charges for damages.
It’s imperative also that any non-returnable legal fees like cleaning or pets are stated upfront. Depending on which state you are in, it is also a legal obligation to list details on where the security deposit will be held and whether or not interest incurred on the deposit will be paid to the tenant, so double check with state laws to make sure the legalities surrounding this are made clear.
Repairs and Maintenance
Both the landlord and tenant’s responsibilities for repair or maintenance should be clearly stated in your lease or rental agreement to prevent any additional miscommunications or potential problems along the line.
The most obvious of these for both tenant and landlord is the responsibility of the tenants to ensure the rental unit or property is clean, sanitary, and hygienic. If in a case of neglect, misdemeanor or neglect, whether there will be financial sanctions incurred, or in the worst case scenario, termination of tenancy should also be stated.
Additionally, tenant responsibilities could include the immediate contacting of the landlord incase of discovering any dangerous potential conditions within the property, such as a carbon monoxide gas leak, or bucking upstairs floorboards. Procedures for encountering these scenarios, plus complaint and repair requests must be outlined.
Finally, one of the most common provisions is the restrictions on what alterations, if any, tenants can or can’t make to the building. This could include white goods such as built in utility systems like a dryer, or external changes like painting walls.
If you or any other tenants are planning to bring a pet inside your new home, you must check the details of your tenancy or rental agreement to see if this is something that you are able to do.
Some landlords are against allowing pets due to previous damages incurred, and some must act within the realms of any insurance policies that they are under.
Whether or not pets are allowed into the property or rental unit should be stated, as well as if they are, how many, and what type. For example, a small dog may be preferable over a breed like Alsatian, and likewise, there may be a 5 cat limit.
Right of Entry
This is another important clause to get right for the tenant and landlord relationship.
Whilst in a rental property all tenants are safeguarded by a violation of privacy right, which can bring justice against any landlords entering the property for unjust or sinister reasons.
To keep both parties staying on the right side of this law, ensure that the lease or rental agreement clarifies the terms in which you can and will enter the property, as well as what notice will be given.
Additionally, state laws regulate landlord’s rights of entry, so it is advisable to double check the provisions stated in your rental agreement abide by legal jurisdiction.
Wrapping It Up
Rental agreements offer protection for both landlords and tenants, and occasional rechecking of the terms and conditions laid out in the agreement is always a good idea to ensure that all provisions are kept up to date and in accordance with any change in state law legislation.
For both landlords and tenants, one of the most common mistakes is to simply speed through the agreement without taking proper due care and attention as to the terms the agreement contains.
If you are a new landlord or tenant and short on time or unsure of what should or shouldn’t be included in your lease or tenancy agreement, or even unsure as to whether the legal jurisdictions are correct, it is advisable to consult a property management company who can give you a complete guide to property management.