Rental agreements are essential documents that you should not take lightly. The language you use in a rental agreement dictates how you can legally resolve issues and enforce penalties later.
For this reason, you should closely review every clause in your lease. No one likes reading (or writing) dense legal documents but being thorough is preferable to discovering that your tenants are exploiting loopholes down the line.
Leases are also the most important document for protecting you against inconvenience and liability.
Since rental agreements cover a lot of bases, it’s easy to forget about certain clauses. If you’re new to real estate management, using a template is a smart way to get an idea of what you should include in a lease. In many cases, your free rental property management software can assist by providing examples, helping you designate lease fields, and automating much of the process.
Here are six key clauses to include in every rental agreement.
- Right to Entry
Every lease should have a clause granting you the right to enter your units. Your tenants are paying to make your property their home, but there are still circumstances where you may need to enter.
Your right to entry clause should include what those circumstances are (maintenance, inspections, emergencies, etc.), how much prior notice you will give, and the hours you’ll enter. Remember, you are legally obligated to give tenants prior notice that you’ll be entering their units. In most states, you must give them notice at least 24 hours in advance.
This clause protects your right to inspect units so you can appropriately enforce the lease agreement and receive compensation for any rule-breaking.
- Guests and Occupants
Don’t let tenants assume how many guests and occupants they may have in their units. In your lease, clearly state any restrictions on the number of guests that can be visiting any one unit at a time and at what hours.
You should also specify your occupancy standards—how many tenants are expected (and allowed) to live in a unit at any given time?
Finally, if overnight guests are allowed, how long would they need to stay before they are considered illegal occupants? Specify the penalty for this circumstance in your agreement and include a clause indicating that the tenant is responsible for any damages caused by guests.
If you find evidence that tenants are breaking either guest or occupancy rules, this clause gives you the right to enforce any designated penalties.
- Pets
Tenants should already know your pet policy from your rental application. However, you must include a pet clause in your lease to enforce pet-related rules.
If pets are not allowed under any circumstances, state this rule and the associated penalty. Otherwise, state the conditions under which a tenant might own a pet (species, temperament, cleanliness, etc.).
Remember that in many states, service or assistance animals are not considered pets and are therefore exempt from any pet restrictions you may have in your lease.
- Late Fee Policy
Your late fee policy is another critical clause to include in your lease. Specify the facts and penalties surrounding rent due dates and fees as clearly and concisely as possible. For instance, you’ll want to clarify when a payment is considered officially late: after the payment is submitted late or received late?
You should also use this clause to specify the length of any grace periods you offer and the amount of the late fee you’ll charge if their payment is late.
This clause protects your right to receive rent on time, or if not, at least some additional compensation for the inconvenience.
- Surrender of Premises
Finally, you should also include a clause that covers what a tenant should expect before moving out. A surrender of premises clause outlines the agreement that your tenants will surrender the property at the designated lease termination date and follow any guidelines or conditions you indicate.
This clause is not the same as early termination or abandonment clauses. You should include two entirely separate clauses to designate what happens when a tenant wants to move out early or abandons the property altogether.
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Master Lease-Writing
Lease writing can be a tedious and lonely process. The good news is that once you’ve written one lease, you have an excellent template to use with future units you acquire. Remember that you can upload your leases, edit them, and share them with tenants by email with property management software. Tenants can even sign using eSignatures with document signing features. By utilizing software and remembering each of these clauses, you can be sure your lease offers adequate protection for your business.
