“Key Points To Know About A Rental Agreement” written by Mike Marko
Do you know what all goes into a good rental agreement?
There are a lot of sites online that talk about what goes into a rental agreement. But there are certain key points you need to better understand and include to help ensure you have the best rental agreement.
In today’s blog post, I will talk to you about the key points that you need to know about a rental agreement. You will also learn about the different types, and guidance for you to help select the best agreement for your property management.
What You Need To Know About A Rental Agreement
When opening or developing a property rental management business you need to have the documents or contracts needed to run and manage the rental units you are renting. Having an effective and proven rental and lease agreement to manage your rentals is key to the success of your business.
A rental agreement is a legal document that a landlord or a property manager uses to rent and manage rental units and property. It’s an agreement or contract that has become a part of their daily lives when it comes to dealing with their properties.
A rental agreement is necessary legal document used to manage and rent the property or rental units. In order to use it properly, property managers need to understand all the terms and know what they can and cannot do with rental agreements compared to other agreements and rental contracts.
But before anything else, let’s discuss what a rental agreement is and how it works.
What Is A Rental Agreement
A rental agreement is a legally binding contract used to rent and manage the rental property that is being rented. Since it is an agreement it can be in written or oral form, and the agreement details the relationship for rental between the owner of a property and a renter.
In a rental agreement, the renter by terms of the contracts takes temporary possession of the property he or she wishes to rent. Since the contract states that the renter has temporary use and possession of the property the terms of the rental agreement detail how each party to the contract must act and live by during the term of the contract.
What does that mean exactly?
Since the rental agreement or contract is temporary, certain restrictions are implied and agreed to by both parties.
What’s In A Rental Agreement
The rental agreement identifies the following:
– Parties involved
– The property
– The terms of the rental
– The amount of rent for the term of the contract
A rental agreement is also known as a periodic rental agreement. It is generally a month-to-month contract where terms can change each time it is renewed. A proper written notice must be given 30 days prior to ending a rental agreement.
Rent Control Laws
Unless subject to rent control laws, rents can be higher and set by market demand and competition for rentals.
Rent control laws are a way that areas or communities have restricted the levels of rents charged. They also make the landlord or property manager abide by the restrictions placed on rents that can be charged.
Only a few communities have rent control laws for their rental agreement. The states of California, the District of Columbia, Maryland, New Jersey, and New York are the only five states where communities have rent control laws. You need to check with your local rental board to see if any rent control laws apply to your area, even in the States listed above.
Rent control laws are sometimes called rent control ordinances, rent stabilization or maximum rent regulation limits the following instances:
– The amount of the rent the landlords and property managers may charge.
– The circumstances and the number of times rents may be increased.
– The percentage by which the rent can be increased per year.
Differences Between A Rental Agreement And A Lease Agreement
A rental agreement is a month to month rental document whereas a lease agreement is a contract for a certain amount of time normally a one year term. Sometimes the term rent and lease are used side by side and even in place of one another causing misunderstanding to those who read it. Thus, it can sometimes be very misleading especially for tenants.
Besides the length of the term of the contract, there are certain differences between a rental agreement and a lease agreement that should be understood when using both documents for rental of property.
Here are some clarifications that can help you identify which agreement you should use for each of your renters.
A rental agreement often provides a tenancy for a short period of time. It often only lasts for 30 days hence the name periodic or month-to-month rental agreement. In this agreement, the landlord or the property manager can easily change the amount of rent and the terms of the agreement at the end of the short term or month to month. A proper written notice must be given 30 days prior to the change of terms of the agreement.
The agreement is also automatically renewed at the end of the period unless the tenant or landlord ends it by giving written notice.
In a lease agreement, the landlord or the property manager gives a renter the right to occupy a rental unit for a set term longer than 30 days or month to month. The term is often set for six months or a year. Sometimes the term can also be longer covering up to more than 24 months. The lease agreement will stay in place as the renter pays the rent and complies with all the terms set in the lease agreement.
For the set period or term of the lease agreement, the landlord or the property manager cannot raise the rent or even change other terms of the tenancy. But this agreement does not usually automatically renew itself once it expires. Instead, it becomes a month to month rental agreement that can be ended or changed with proper notices.
Often times lease agreements are preferred by property managers as they provide the landlord or the property manager the comfort of knowing that the renter can’t leave the rented unit at a moment’s notice.
Oral Rental Agreements
Like I have stated above rental agreements can be in oral or written form. Since rental agreements are good for only a short period of time, oral rental agreements are permissible. But keep in mind that an oral rental agreement may cause you some liability especially when misunderstandings arise between you and your renter.
I would not recommend using an oral agreement but if you do you need to understand that you won’t have a legal document to serve as proof that you and your renter agreed on specific terms and a certain amount of rent. Other terms of the oral agreement are also hard to enforce because they are oral. Often times when doing an oral agreement for rent. you might want to do a simple 1-page terms agreement to supplement the oral agreement to avoid misunderstandings.
Having an oral agreement may often lead to disputes. That is why some states suggest a written agreement.
Written Rental Agreement
To avoid disputes having a written rental agreement is recommended. A written rental agreement serves as a vital and legal document that should be completed prior to a landlord or a property manager accepting renters to his or her property.
A written rental agreement can greatly help you prevent future issues. The agreement sets the terms for your renter to follow. The length of tenancy, the amount of rent, certain terms, responsibilities, and condition or even the deposits the renter must pay should all be in a rental agreement.
This written rental agreement is also useful when disagreements between you and your renter arise or if you have to settle an issue in court. The agreement will serve as a tool that the court may need for judgments. This also serves as a reminder for both parties that they specifically agreed to certain terms and responsibilities.
Final Thoughts On The Importance Of A Rental Agreement
In this article, we talked about the rental agreement and the different types of rental agreements. We also talked about why you should go with a written agreement instead of an oral agreement, and the differences between a rental agreement and a lease agreement.
If you have any questions or anything to add about a rental agreement please include them in the comments below.
1. Information You Need To Know About Termination Of Lease Agreement
2. Getting To Know The Different Types Of Multi-Family Rental Buildings
3. Key Points To Understand About A Month To Month Rental Agreement
If you need help marketing your business online then check out IM Consultant Services.
Disclaimer: This commentary is a matter of opinion provided for general information purposes only and is not intended to be taken as investment or trading advice under any circumstances. Information and analysis above are derived from sources and utilizing methods believed to be reliable, but we cannot accept responsibility for any losses any person may incur as a result of this analysis. Individuals should consult with their personal financial advisers. By using this website or any information contained in it, the user specifically and expressly agrees that no advisor-client relationship is created between said user and any author, owner, executive, or principal of this web site by either use of this web site, or by any information, product, or service offered by or on this web site. No express or implied guarantees or warranties as to investment or trading results are made, and any perceived insinuations of such are hereby expressly disclaimed.
Article: Key Points To Know About A Rental Agreement