Landlord Basics: Leases

lease

(This post is part of our “Landlord Basics” series, which seeks to help the new landlord / investor understand some of the basics of tenant relations and property management.  You can view the rest of the series here.)

You’ve found the tenant you want to place in your property, collected a security deposit, and now it’s time to sign a lease.  What is a lease?  What makes one lease better or worse than any other?  What can your lease do to protect you as a landlord or investor?  This article will answer all these questions, and more.

Simply put, a lease is a legally binding agreement between tenant and landlord, which states that the landlord agrees to allow the tenant to use the property for an amount of time, and in return the landlord will be compensated in whatever fashion has been negotiated between the parties, usually in the form of money.  A lease is typically written for a specific term, commonly 1 year.  Other terms are sometimes offered, such as 9 months (or a student lease), and 6 months (half a year).  This differs from a rental agreement, which is usually a month to month contract between the parties.  There are other significant differences, which will not be covered in this article.

Leases can be obtained in a number of ways.  Many real estate agents, investors, property managers, and lawyers have leases that they will be willing to give you a copy of.  You can also find leases in many office supply stores.  In addition, there are many websites which offer leases online, for free or at a cost.  Keep in mind that you will often get what you pay for.  At the time of this writing, my preferred lease is written by an organization called The Landlord Protection Agency.  The leases, and other forms they provide, can help make managing your property infinitely easier.  The reason I like their lease is the built in protection for the landlord.  It is very comprehensive, yet very simply spoken, and easy for both tenant and landlord to understand.  This becomes important when the tenant needs to know their responsibility, or the landlord needs to enforce a portion of the lease.  You should always have your lawyer review your leases before enacting them, to protect yourself further.

A good lease will spell out the terms and conditions of the lease, and detail who is responsible for what.  Some things that are particularly important to spell out are:

  • Utility Responsibility – who pays for what utilities?
  • Maintenance Responsibility – who will make or pay for repairs when something breaks?
  • Subletting and Assignment – can the tenant sublet or assign the rental unit to another individual?
  • Pets – Are pets allowed? Is there an additional fee?
  • Appliances – What appliances, if any, are included?  Be sure to record make, model, and serial numbers.
  • When is the rent due?
  • What happens if rent is not paid? (late fees, eviction, etc)

This is most certainly not a comprehensive list, and there are requirements and restrictions that vary from state to state, which is why I suggest consulting your lawyer once you have determined what you will be using for a lease.

Having a lease that protects you and your property is a key to your success as a landlord or real estate investor.  Your lease, along with proper documentation, will help you and your tenants enjoy your investments for years to come.

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One comment to Landlord Basics: Leases

  • Landlord Basics: Lease Clauses | Andrew-Schultz.com  says:

    […] a few different aspects of leases so far, from basics such as what a lease is and what it does (here), to security deposits (here), to late fees (here).  The lease is between a landlord and tenant is […]

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