Renting out a house can be a great way to earn a steady passive income. Unfortunately, being a landlord doesn’t come without risks. Unsuitable tenants can cause a lot of trouble, including nonpayment of rent, property damage, holdover tenancies, and legal trouble such as lawsuits and evictions.
The good news is that you can protect your investment by drafting a solid rental agreement! A well-crafted lease sets clear expectations, outlines responsibilities, and helps prevent disputes. Drafting a rental agreement can seem like a daunting task.
Writing a lease is not as difficult as it seems! In this article, the experts at JTS Property Management will go over the essential information any rental agreement should include. Let’s dive in!
Landlord and Tenant Information
A rental agreement is a contract. As such, it should include the full name and contact information of all parties involved.
This includes you, the landlord, and all adult tenants who will be living on the property. This ensures that all tenants are legally responsible for following the terms of the lease, which can greatly reduce breaches and disputes.
Relevant Property Information
Every rental agreement should include essential information about the property or unit that’s being leased. This includes the address and a brief description of the property that specifies the type of property (for instance, an apartment or single-family home), square footage, layout, and any included amenities, such as parking spaces or storage units.
Lease Terms
Your rental agreement should state whether it is a periodic or a fixed-term lease. Whether you’re renting your home on a weekly, monthly, or yearly basis, you should specify the start and end dates, as well as any options for lease renewal or extension, including notice requirements and potential rent increases.
Price of Rent
One vital piece of information rental agreements should always include is the price of rent. Simply stating the amount of rent will prevent misunderstandings or partial payments.
Additionally, your lease should specify when rent is due, the acceptable payment methods, and when/if late fees will apply if rent is not paid on time or if a check bounces due to insufficient funds.
Security Deposit Rules
Despite being a common practice, security deposits are a frequent source of disputes between landlords and tenants. To avoid misunderstandings and discussions, your lease should include the following key information regarding security deposits:
- The security deposit amount that will be charged.
- How the deposit can be paid.
- Where the deposit will be stored.
- How you may utilize the deposit.
- Reasons for deductions.
- When and how you will return the deposit after deductions are made.
- Any additional non-returnable fees you will charge, such as for cleaning or pets.
Maintenance Responsibilities
Maintaining a rental property is a shared responsibility between landlords and tenants. Unfortunately, some tenants don’t know what maintenance tasks are their responsibility. To avoid misunderstandings and property damage, you must make sure to specify tenants’ maintenance duties on the rental agreement. This includes:
- Tenants’ responsibility to keep the rental property clean and sanitary
- Tenants’ responsibility to pay for any major damages caused by their neglect or misuse of the property and its appliances.
- Tenants’ responsibility to alert you of any problems or repairs that may require immediate attention.
- Restrictions on the repairs, renovations, and alterations tenants can make.
Early Lease Termination Policies
Tenants in California can legally break their lease early under specific circumstances, such as being on active military duty or their landlord’s failure to keep the property maintained.
If you’d like to have the flexibility to end a tenancy early, you should add an early termination clause to your rental agreements. Just make sure to include:
- The conditions under which the lease can be terminated early by either party.
- Notice requirements.
- Potential penalties for early lease termination, such as losing the security deposit or paying any fees.
Occupancy Limits and Subletting Policies
Tenants allowing other people to live in your rental without your knowledge is a serious risk. If they’re not on the lease, these unapproved tenants can’t be held responsible for any damages they cause or for failing to pay rent.
Luckily, you can avoid this by stating the maximum number of occupants allowed in the unit on your rental agreement. Additionally, you should state whether subletting is allowed and outline any requirements or restrictions for it.
Pet Policies
Allowing pets into your rental can be incredibly profitable. After all, tenants with pets are willing to splurge more on accommodations that allow their furry friends. However, pets can cause property damage or even disputes among tenants and neighbors. To keep your investment protected, make sure to include detailed pet policies on your rental agreement. This should include the following:
- Whether or not you allow pets.
- Size and weight restrictions.
- Number of pets allowed.
- Tenants responsibilities regarding property upkeep and disposal or animal waste.
- Pet screening requirements.
- Pet fees or deposits.
Additional Rules and Restrictions
Setting clear expectations from the get-go is crucial for a stress-free tenancy. That’s why your lease should detail any specific rules tenants must follow when living on your property. These can include:
- Noise Restrictions: Include specific quiet hours and restrictions on loud activities such as parties on weekdays. Additionally, outline penalties for violating these noise regulations.
- Smoking: Outline whether smoking inside the property is allowed and rules regarding cigarette waste.
- Alterations: Detail whether tenants are allowed to make alterations to the property and any conditions for doing so.
- Insurance: If you require tenants to obtain renter’s insurance and provide proof of coverage, you should outline it in the lease.
- Parking: If your property has assigned parking spaces, make sure tenants know when they can and cannot park.
- Guest Policies: Outline any restrictions on guests, including duration of stay and notification requirements.
- Property Usage: Tenants running an unauthorized business from your property can have serious legal repercussions for you. So, make sure to outline the limits on the type of business or activities a tenant may run from your home.
Bottom Line
A lease agreement outlines the rules and expectations tenants should follow during their tenancy. A well-written lease can go a long way in keeping your investment protected and ensuring a smooth rental experience for both you and your tenants. Now that you know the basic information every lease should include, you’re better prepared to draft a solid rental agreement!
If you need help writing a rental agreement for your property, contact JTS Property Management. Our team of expert property managers will be happy to help you!
