“Tutorial On How To Make A Standard Lease Agreement”
Every property manager needs to know how to create a standard lease agreement. This document can do a lot for them, the tenant, and the rental property business.
Once signed, the standard lease agreement will become a legal document. Everything that’s written on it can dictate the fate of the rental business.
If you have a bad lease agreement, it can cause the downfall of the rental property. You can lose a lot of profit or the rented property might lose its value after a tenancy.
That’s just some of the consequences of having a bad lease agreement.
To help you avoid that, I’ll give you an idea of how to create a standard lease agreement for your property. Once you know how to create a standard lease agreement, you can simply customize it according to your needs.
Create a Standard Lease Agreement for Your Property
The standard lease agreement is an important document for you and your tenants.
You could face a lot of problems if you don’t have at least a pre-made standard lease agreement. The problems you could face might even cost you the rental property business.
That’s how important the lease agreement to every property manager. It can either bring them success or failure.
To show you why that’s so, here’s what lease agreement is.
What Is a Lease Agreement?
A lease agreement is a document that gives the tenant the right to use the property for a fixed period of time.
This type of agreement usually lasts for 12 months or more. In some cases, property managers also give a lease agreement to tenants who will stay in the property for a short time — 3 months or more.
The lease agreement typically has fixed terms and conditions. The amount of rent, rules regarding pets, and other terms will remain the same throughout the tenancy.
The property manager and tenant can’t change what’s in the agreement without written consent from each other. What’s more, they can only change it once the contract ends or before they renew it.
Having a lease agreement is beneficial for the property manager. It secures an arrangement that can be a steady source of profit.
The tenant can’t stop paying rent or vacate the property until the lease agreement’s end date. The agreement is a legal document binding him to this.
A lease break will happen if the tenant or property manager chooses to end the tenancy early. Usually, there are provisions too in the agreement for instances of lease break, such as whether or not the security deposit can be used to cover fees related to it.
A Tenancy Without Agreement
It’s worth noting that not all tenancies come with a standard lease agreement, though. A tenant can still legally move into a rented property without an official lease agreement.
When this is the case, the parties involved usually just rely on an oral agreement. This is actually a fairly popular option in certain areas.
An oral agreement is fine if you want to avoid paperwork. But keep in mind that this option is risky.
There’s no concrete proof that either you or the tenant have agreed on a certain set of rules for renting the property with an oral agreement, after all.
A lot of mix-ups can happen if you don’t have a standard lease agreement with your tenant. This can even affect the other tenants in your rental property and disturb the peace among the tenants.
Also, tenants without a written lease agreement are more likely to cause problems. That’s because they don’t know anything (or don’t have an available reference) about the rules and policies for renting the property.
That’s why it’s best to provide a standard lease agreement even if tenancies without written lease agreements are possible. It can keep everything in order.
Besides, creating a standard lease agreement is easy. You just need to have a little background about it so you know what to do.
To help you with that, I’ll take you through how to make a standard lease agreement.
How to Make a Lease Agreement
Creating a standard lease agreement is simple enough. However, it must be done carefully.
You need to keep the standard lease agreement free from error. Like what I’ve said, it will become a legal document once you and your tenant sign it.
You can get help from a rental lawyer. They can give you advice on how to create a standard lease agreement.
But before you call a rental lawyer, it’s best to write a draft first. This help you have the right standard lease agreement for your rental property business.
Moreover, presenting a draft to the rental lawyer allows them to easily make the necessary changes. You can present the agreement to the tenant quickly if the rental lawyer only needs to make minor changes.
With that said, start the draft by adding basic information about you, the tenant, and rental property.
The Basic Information
The top part of your standard lease agreement should include basic information pertinent to the lease.
State that the contract is a lease agreement. This should be followed by information about the individuals involved in the tenancy.
The top part of the standard lease agreement should also include details about the rented property. To give you an idea, here are the usual pieces of information that are included about the rented property:
- House Number,
- Street name,
- State, and
- Postal Code.
Lastly, don’t forget to mention that you’re the property manager or landlord (whichever’s applicable). This states that you are also bound to follow what’s written in the standard lease agreement.
The Terms of the Lease
The standard lease agreement often has information about the tenancy in its middle part.
So include terms and clauses regarding the limits on occupancy, subleasing, and your right of entry. You should add those vital clauses so the standard lease agreement can minimize misunderstanding.
You should also state the start and end date of the tenancy. It’s better to be specific about the dates, as you want no doubt in this area.
Don’t make a habit of writing terms like “this lease is for eight months”. Instead, be specific by saying things like “The lease begins on Dec 09, 2019 and ends on July 31, 2020”.
Details About Fees and Payment Forms
The standard lease agreement should give details about fees and payment forms. Be sure to state details about rent, fees for penalties or utilities, and the security deposit.
Giving details about fees and payment ensures you that you’re going to get the right amount of money. That’s because the tenant won’t be confused about how much and how they will pay fees for renting your property.
Like the other terms of the tenancy, it’s best to be specific in giving details about rent. Add the rent’s amount and when the tenant should pay it.
If there’s a fee for late rent, mention it as well.
In addition to that, don’t forget to include details about other fees such as the security deposit or utility and maintenance fees too. This can prevent possible problems regarding payments.
Most disputes between tenant and property managers are because of those fees, after all.
Don’t forget your preferred forms of payment either. This can avoid late payments because tenants are sure where and how to pay.
Obligations of Each Party
The bottom part of a simple lease agreement is where you can usually find the section stating the obligations of each party.
Adding detail to this section in your standard lease agreement can further help you avoid mix-ups during the tenancy.
The obligations that you give to your tenant should be fair or reasonable, however. To avoid making an unfair set of responsibilities, check the rental laws in your area.
Get to know the lawful obligations that you can give to your tenant. This can help you avoid getting into legal disputes with tenants later.
A bit of advice here is not to give all the responsibilities to your tenant, especially the maintenance. You’ll find it hard to attract potential tenants if they will also have to do the maintenance or upkeep of their rented property.
Just let the tenant pay rent and use the property. This makes their lives easier and helps you avoid vacancies.
Finally, if you have specific rules or terms for renting your property, add them to your standard lease agreement too. Don’t just include the usual clauses.
Not adding specific terms will just cause you problems later. Your standard lease agreement would be useless if this happens.
That’s why you should provide for everything possible in your clauses. For example, state in your lease agreement that the rental is to be used for residential purposes only.
This can keep your rental property safe and free from certain dangers. Sometimes, criminals use rental properties to do illegal activities like making drugs, for example.
Having that in mind, make a list of the activities that you forbid inside the rental property. Include that in your lease agreement.
Stipulate the activities properly to ensure the safety of your rental properties. If the tenant violates your rules, be sure to mention the penalties.
Let a Rental Lawyer Check the Lease Agreement
Once you’re done with your draft, don’t print it yet. Present your draft to a lawyer and allow them to make the necessary changes.
It’s important to consult a lawyer because he can give you advice on the legality of your draft. He may even tell you if you’re violating a specific rental law with one of your clauses.
Making a violation of the rental law could negatively affect the reputation of your rental property business. This will give you problems finding potential tenants.
People, in general, avoid living in a property with a bad reputation.
Giving the Lease Agreement
The lease agreement is usually given before the tenant moves into their rented property.
In some states, a lawyer must be present while you and your tenant are signing the lease agreement. This is done so there’s someone to testify that the tenant agrees to the rules and policies of renting your property.
Once your tenant has signed the lease agreement, make a copy of it and give it to them. This is needed to validate the tenancy.
Final Thoughts on Standard lease agreement
In this blog post, I talked about a standard lease agreement.
The lease agreement is a legal document you will find in nearly every landlord’s arsenal. It contains details about the tenancy for a leased or rented property.
Particularly, it contains information about the tenant, property manager, and rented property.
The lease agreement also contains terms and clauses for renting the property. Examples of that are the terms of the tenancy, duties of both parties, and terms for rent and other payments.
You can let a tenant use your property without a lease agreement. However, this is risky.
You could face a lot of problems if your tenant is not aware of the terms and policies for renting your property. That’s why it’s better to give a standard lease agreement to your tenants than rent property without one.
If you have more questions about the standard lease agreement, leave them in the comments below.
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Article: Tutorial On How To Make A Standard Lease Agreement