“What A Tenant Lease Agreement Should Cover” written by Mike Marko
Are you in the process of creating or revisiting your tenant lease agreement?
Making a tenant lease agreement is not that hard. But you do need to include the right information and clauses or sections to include in your agreement. However, many property managers fail to include pertinent information that is useful (and necessary) for the tenant and to protect themselves.
To help avoid leaving some of the important information, we will discuss what a tenant lease agreement should include. I’ll also give you some tips to help you when you start writing your draft.
Learn More About The Tenant Lease Agreement
The tenant lease agreement is the legal document that helps to manage any type of property rental. As a property manager, and since you are the one offering the rental property for rent, it is your responsibility to provide a lease agreement to your tenant. When starting or running an established property management business you should develop the correct knowledge of what information to include in an agreement is important for property managers.
In this article, I will help you increase your knowledge about tenant lease agreement and how you can write or adopt the best one that fits all of your rental needs.
But before discussing anything else, let’s find out the formal definition of and know and understand what is a tenant lease agreement first…
What Is A Tenant Lease Agreement
A tenant lease agreement is a formal contract between a landlord or property manager and a tenant. It contains all the things that a landlord and a tenant have agreed to about the tenancy and serves as the legal document that governs the property while it is being rented.
As the property manager for your rental properties, we would highly advise that you provide a written tenant lease agreement before the actual tenancy begins. The main reason you should establish this contract prior to rental of the property is to show as legal proof that you and your tenant have settled on the terms, details, and responsibilities of the agreement. Even if the agreement is only verbal and it is not written out, both parties are still required to fulfill their respective responsibilities and follow the terms and policies for renting the property.
The tenant lease agreement shall contain information about the tenant’s tenancy throughout the lease term. The following are the information that will be included in the lease agreement.
- The names of the landlord and all the tenants who will live in the rental unit
- The responsibilities of both parties throughout the lease
- The amount of rent to be paid by the tenant
- Every other important detail that should be covered about the tenancy
Once done, it will serve as the reference for both parties during the rental of the property. The landlord and the tenant will legally agree to the rules and responsibilities that they have negotiated to observe throughout the duration of the lease term.
Types Of Agreement
A lease agreement may come in two types. Depending on the duration or the length of the tenancy, here are the two types of leasing agreements that you should be aware of and know how and when to use in your property management business...
- Periodic tenancy
The periodic tenancy has no end date and the tenant can stay on the property as long as the property manager lets them stay. The contract normally serves as a month to month type lease agreement and the rents can either be paid in a month to month basis or on a weekly basis.
- Fixed term lease
Unlike periodic tenancy, fixed term lease has an end date. It is completely the opposite of the periodic tenancy because when the contract expires, the tenant has no choice but to move out because they can’t rent it anymore. However, at the end of a fixed term lease, the lease will convert to a periodic or month to month lease until the tenant moves out or the contract is renegotiated.
Both tenant and property manager can end this agreement early as long as they both agreed to end it.
Information That Should Be Included In The Tenant Lease Agreement
The lease agreement is a legally binding document and thus it should attempt to cover all the needs, responsibilities and terms for the rental for both parties that are entered into the rental contract. The contents of a tenant lease agreement may differ from each other but they always contain the basic important and identifying information about the tenant and the property.
Here are the common contents of a tenant lease agreement.
Parties involved in the lease
Since the lease agreement is a legally binding contract it should contain the names of all the tenants who will be renting and living in the rental unit. Aside from that, the lease agreement should also name the landlord or the property manager with the addresses and contact information of all the parties involved.
Description of the rental unit
Most tenant lease agreement also includes a brief or detailed description of the rented property. The name of the rental unit is always included in this part along with the classification of the property, the numbered of allowed tenants, and its complete address. A detailed description with pictures can help in resolving any damage issues and who is responsible for paying those damages when the tenant moves out of the property…
Start and end date of the Lease Term
All tenant lease agreement includes various information about the tenancy. One of the most important items to include in the lease agreement is the length of the tenancy with move in and termination dates. The start and end date of the tenancy can be found in this part of the lease agreement.
Rental Fees and Security Deposits
Details of rental fees and security deposits are also included in the tenant lease agreement. The amount of security deposit that should be paid by the tenant is listed here along with the amount of rent due, preferred payment methods of the landlord or property manager, the frequency of payment, and penalty fees for late payments of rent. It is appropriate to include terms regarding uses of security deposit upon the vacancy of the rental to avoid any confusion or misunderstandings between parties to the lease agreement…
You can also add information about advance rent payments details and other terms detailing rent escalations if necessary.
Repairs and alterations
The tenant lease agreement is the best place to address and to list all of the responsibilities in making repairs and the allowed alterations to the rented property.
A specific delegation of responsibilities between the two parties when it comes to repairs and alterations should be detailed in writing to avoid confusion or misunderstandings that could cause problems between you and your tenant.
Prior to renting the property you as the property manager need to determine if you will allow a subleasing clause. The main concern for a property manager is taking care of the rental properties and making sure they are constantly generating rents or profits for landowners or investors.
Including a subleasing clause allows the renter to rent out the unit to another person during the contracted lease period. As part of a subleasing clause, you might require your tenant to get a written permission from the landlord or property manager before the subleasing. Additionally, you could state in the terms of the subleasing clause that the new lessee must go through background and credit checks and qualify for the contract to be transferred to them through subleasing…
Termination Of Lease Agreement
A good tenant lease agreement defines all the responsibilities, duties and terms of the property rental. When these are broken by either party then this could cause the property to All tenant lease agreement also covers the instances where the parties can terminate the lease agreement.
When writing a tenant lease agreement draft you should include all of the possible reasons why your lease agreement with tenant could be terminated. You can also include how the termination and eviction process goes if a violation of the agreement happens.
To further protect your rental properties it is important to include in the terms of the agreement any restricted activities that should not be done by tenants within the grounds of the rental units. Restricted activities can be related to hours when tenant should not cause any noises to disturb neighbors, especially at night.
Any warnings for violating this clause should also be written in your tenant lease agreement.
Tips In Preparing A Tenant Lease Agreement
From the details, we have provided in this article you should have a firm understanding of what makes up a tenant lease agreement.
Are you ready to make your own agreement?
Before you start writing your draft, consider following these tips in preparing a tenant lease agreement.
Familiarize the rental laws before writing a tenant lease agreement.
Like any legal contract or document, it is best to consult with real estate lawyers and rental laws prior to writing your draft. Knowing and understanding the rental laws in your area will help you avoid any mistakes when finalizing the agreement with tenants. Having a knowledge about the local rental laws will help you avoid any violation of rental laws. It is also advisable to consult a rental lawyer when writing a tenant lease agreement.
Follow required format of a tenant lease agreement in your area.
There is a specific format required in some states. Make sure to follow the required format of the agreement in your area even though there are many templates available online.
Be very clear on the information you will put in each clause. Make it straight to the point to avoid misunderstandings and confusions.
Specify the good condition of the rental unit in a clause.
Include a clause which specifies that the rental unit is in a good condition before it’s rented and that it has no damages. You might want to include pictures and signed documents showing condition was verified prior to rental of the property…
Make sure to include a clause on pet policy.
When writing a tenant lease agreement draft you need to determine if pets are allowed then specify conditions for the types of pets allowed and whether you will allow pets on the rental units or not. If you will allow pets, also add your specific rules and restrictions regarding the tenant’s pets. Sometimes when allowing a pet for the rental you can collect an additional security deposit that could cover any damages that may occur due to the pet in the rental…
Clause giving you the right to enter the rented property for inspections and emergencies.
To avoid major damages to the property it’s important to include a clause allowing you to enter the rental when needed. The best way to do this is to cite the specific number of notices that you should give before you can legally enter the rented property. Also, mention your right to enter the property for inspections and other emergencies.
Determine where the security deposit will be used.
The usage of the security deposit is one of the common reasons for an argument between a property manager and the tenant. It is advisable to determine the instances where you are allowed to use the security deposit.
You can include the costs to clean or replace carpets or other repairs when the tenant vacates the rental. It is best to make sure that you specify the amount of security deposit that the tenant needs to pay and the possible uses for that security deposit upon the vacancy of the rental unit.
Clearly state the exact amount of rent and fees to be paid by the tenant.
Since the tenant rental lease agreement is a legal and binding contract it is best to put into terms the day each month that the rent is due. Make sure to include all of the important information about the rent which should include details about penalties for late payments and the accepted payment methods.
Write a clause that will give the tenant a responsibility in maintaining the rental unit.
As the property manager, it is your responsibility to take care of the rental properties before, during and after a tenant rental. When the property is being rented, it is advisable to designate specific responsibilities to the tenant to avoid any misunderstandings between you and the tenants renting the property.
Here are the responsibilities that you could give to your tenants:
- The maintenance and upkeep of the rental unit during his/her stay.
- Responsibility for the repairs if the damage was caused by the tenant’s negligence.
State activities restricted within the rental units.
Think of the exact activities that you prohibit inside your rental properties then write it in your draft. Also, include any warnings or penalties for violating any restricted activities. Common clause or terms to include would be any illegal activities or activities that could endanger or harm other residences or property…
Include a clause which will explain what will happen when the tenant breaches the tenant lease agreement.
Since the lease agreement serves as a legal document for any court proceedings or misunderstandings. It is best to specify the actions you will take if the tenant breaches the tenant lease agreement. You can also include the action that the tenant can do to remedy the notice of termination.
Final Thoughts About Tenant Lease Agreement
A tenant lease agreement is a contract between the property manager and the tenant. In this blog post, we talked about the important information needed in a tenant lease agreement. There are a lot of lease agreement templates on the internet but it is advisable to make your own (and customize it) so it perfectly suits the type of tenancy of the tenant.
Make sure to check the rental laws and the required format of the agreement in your area before you start writing your draft. Include all of the important clause, terms, and policies in your rental agreement. And make sure to consult a rental lawyer before finalizing your draft.
Feel free to post any questions you have in the comment section below.
1. The Advantages Of Using Property Management Software
2. How To Choose The Perfect Retail Space For Lease
3. American Apartment Owners Association For Landlords And Property Managers
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.