Last post we discussed different ways to collect rent from tenants. That is just one of many items that will be stated in your residential lease agreement so let's delve into different types of leases and how to ensure you have a quality lease agreement.

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If you missed the last post:
Do's and Don'ts of Rent Collection

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The definition of a Residential Lease is a legally binding contract between a tenant and a landlord. The lease gives the tenant the right to use the named residential property in exchange for payment to a landlord.

Lease Term Types

Month to Month

This is the most flexible type of lease as it is only binding for a month and technically renews each month until either the tenant or landlord terminates it.

Notice of termination varies as there are different minimum numbers of days depending on your state. However somewhere between 7 to 30 days is most common.

Fixed Term

Fixed term leases can technically be for any fixed amount of time. Most commonly these leases will be for 6, 12, 15 or even 24 months.

On these leases termination notice is usually 30 days. On the flipside if the tenant wants to renew the lease then 30 days notice prior to the lease end date is standard, though 45 days is often used as well for longer term leases.

Some landlords, including myself will have a month to month tenancy clause within the fixed term lease. By doing this once the fixed term lease expires all it entails stays in force if the tenant decides to stay, but now it’s just on a month to month basis.

I prefer doing this because it provides flexibility. The tenant and landlord can still decide to renew another fixed term lease, but if one of the parties does not want to commit to another full year for example, then this easily allows both parties to continue on for a shorter period.

This is also good because your termination notice is likely shorter now. Again, 30 days is the standard minimum for fixed term leases of 6 or more months. With a month to month your minimum can be as little as 7 days. For example, property in FL the minimum would go to 15 days on a month to month lease based on state laws.

Drawing Up A Lease

Unless you are a lawyer, I do not suggest drawing up your own lease. You can grab a standard residential lease agreement from a recognized housing authority for your state or from a number of online vendors.

However, these are usually basic cookie cutter leases. You will want to add to it and have an attorney review it.

Especially if it’s your first lease! Please have an attorney review it.

Trust me, the money you spend for a lawyer to review or write a lease for you is peanuts compared to if items are missing or not complete leaving you potentially liable for something.

Items of Discretion

There are many things we are allowed to dictate in our leases that are not governed by law and do not violate fair housing laws.

For instance:

• Will you allow tenants to smoke within your property?
• How about pets?
• And so on and so forth

These are just a few examples of all the variables that you can cover in a lease to dictate how your property may be used.

Again, review these items with a lawyer to make sure you are not violating any fair housing laws. What may seem innocent enough to you, may violate some kind of housing rule without you knowing it.

Once you have the lawyer review your lease then you it as your template going forward. Be sure to pay mind to any change to housing laws in your state, if any, as the years pass so the lease can be updated accordingly as needed.

Reviewing the Lease With Your Tenant

Before the tenant signs your lease be sure that you or your property manager go through it page by page with the tenant. Have the tenant initial each page, to acknowledge they have read and understand what was included.

It benefits you in the long run to ensure the tenant understands everything they are agreeing to within the lease. By doing this you are helping eliminate any potential issues or surprises.

For example:
If your lease states that no more than 4 people may occupy your two bedroom property and you find the tenant has 5 people living in it, then they cannot claim they were not aware of this when notice is given to them for the violation.

In addition, you don’t have to feel like a bad guy giving them notice of violation since you know they were aware of this. For me, that’s worth something as who wants to be the bad guy, right?

Conclusion

Leases can vary from a few pages to dozens. It is just a matter of how detailed you want to be and how many scenarios you want to cover. However, in the end make sure you have the basics covered that come as part of any standard lease and that a lawyer familiar with real estate laws for your states reviews it.

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Regards,
Mitchell J

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