You wouldn't give someone the keys to your
own home unless you greatly trusted them, so why would you turn over the keys
to one of your biggest investments without the same trust? While you won't have
the same kind of personal trust with a tenant, a well-drafted lease agreement
can leave you assured that you're covered if anything goes wrong. Below are
some of the areas where landlords have blind faith that everything will work
and could do with tightening up their leases.
Fees and Costs for Nonpayment
Pretty much everyone goes into a rental
agreement understanding it's a pay or you're out arrangement. Unfortunately, if
a tenant stops paying, it's rarely that simple. If the rent doesn't arrive on
the first, you can't just instantly boot the tenant out. You have to go to
court, serve papers, and then have the sheriff enforce the eviction order. Or
maybe you want to give them a few days before doing all that but want there to be
some sort of penalty so they don't make a habit of it.
If you don't specify these fees and costs
in your lease, you might not be able to collect anything more than the regular
rent no matter how much you spend getting a tenant out. To be sure you recover
your full costs, clearly include any late fees, court costs, and other possible
expenses in your lease agreement.
Ending the Lease
A lease might have an end date, but it
doesn't automatically end. Without proper notice, either the landlord or the
tenant may be able to extend the lease for another full term or on a
month-to-month basis. This extension may also be at the current rent when you
might want to increase it.
To be safe, you want two deadlines in your
lease. One is a deadline to give notice of intent to vacate at the end of the
lease after which the lease is automatically assumed to be extended. The other
is a deadline to renew or extend the lease to give you time to market the
rental if the tenant decides to leave.
Also include how much the rent will be if
the tenant stays in the property beyond the lease term without a new formal,
written agreement. Often, this will be double the previous rent to encourage
the tenant to either properly renew or give adequate notice that they'll be
moving out.
Moving Out
If the tenant does move out, when does the
lease end? Midnight? Close of business? Be sure to specify this. Do you expect
them to have the carpets professionally cleaned? Include that as well. As with
anything else in life, having a clear understanding up front will prevent
future mishaps and misunderstandings.
Community Rules
Some rules are necessary -- like nighttime
quiet hours in an apartment complex. However, the more you try to micromanage
your tenants lives out of fear they'll mess up your rental property, the more
they'll run away out of fear you'll be constantly invading their privacy and
keeping them from enjoying their home. Set minimum guidelines to keep tenants
from driving each other mad, but remember that with or without pages and pages
of rules, they'll be responsible for any damage they do to your property.
Provisions That Go Against the Law
Sometimes, the law requires the landlord
to provide basic amenities like heat and hot water or to take care of certain
repairs. Some landlords try to get around this by putting the responsibility on
the tenant in the lease, or they don't know about the law and don't want to
take on the responsibility. A lease simply can't override the law. Be aware of
the provisions set by your state and local laws because if you aren't, you
could end up making the repair and paying the tenant damages no matter what
your lease says.
To make sure your lease covers everything
it needs to, have a local landlord-tenant attorney draft it or at least review
the form you intend to use.