Would a dealership agree to sell you a car without an agreement in place? Or what about a financial institution, would they give you thousands of dollars without having your signature under a list of terms? Considering these examples, you should have a solid lease agreement before taking the financial risk of handing over your property to tenants.
To give you a comprehensive yet concise breakdown, the team from TruHome Property Solutions has compiled this article on how to make a proper lease agreement!
What Is a Lease Agreement?
A lease agreement, or rental agreement, is a document detailing the rental obligations and responsibilities of both the tenant and the landlord.
The Importance of a Written Lease Agreement
From our experience in the Grand Forks rental property market, we are surprised by the number of landlords who rent out space without a drawn-up lease. While it may seem convenient and an easy way to gain a tenant, nothing can overlook the need for a written lease agreement.
A lease agreement protects you from potential pitfalls. Take, for example, the matter of maintenance. The lease agreement will put the responsibility on the tenant to maintain the space in a reasonable manner in line with its use. In addition, you are able to protect yourself and the investment should there be a potential conflict.
A lease agreement restricts the use of the property by the tenant. This restriction prevents tenants from activities that would be a nuisance to other tenants or possibly have a negative effect on your rental pricing.
A well-done lease agreement will give provision for the landlord to regain occupancy if certain conditions are not met or if there are occurrences of lease violations. This may be in the form of late rent payments, the use of illegal substances on the premises, or the breaking of federal laws.
Preparation of the Lease Agreement
When it comes to the preparation of a lease agreement, property owners have a few options at hand. One of the most common options is to use a free, downloadable template from the internet which is later on adjusted to meet your unique needs. The danger of this method is the possible exclusion of important clauses if one is not well-versed with property law.
We recommend getting in touch with the #1 property management company in Grand Forks, Arvilla, Mayville, and Pembina: TruHome Property Solutions. With over 30 years of combined experience, you can rely on us to provide a custom lease agreement!
Basic Elements of Every Lease Agreement
As we've stated, a lease agreement should be customized to the unique needs of a property. TruHome Property Solutions implements such a policy and doesn’t advocate for a one-fit-all solution.
Despite that, lease agreements contain several similar details:
Details of the Parties and the Rental Property Information
The lease agreement will contain the names and contact information of both the landlord and the tenant. What brings these two parties together is a specific rental space.
The address must be also added to the lease agreement. If the rental space is in a condominium or apartment, the door number should be in the lease.
Due Date of Payment
A lease agreement should specifically state the day on which the lease agreement is due. For example, the 5th of every month. Regardless of it falling on a weekend or holiday, this reduces any confusion that the tenant may have.
Rent is not the only payment in a typical rental arrangement. There is also the matter of utility payments, service charges, pet deposit fees, and parking fees.
The Length of the Lease
It’s important for the duration of the lease agreement to be specified in the lease agreement. You wouldn’t want to create a scenario where a renter can stay on your property indefinitely. A month-to-month lease is also a good option to choose from the different types of leases available.
For the obligations, responsibilities described, and clauses within the lease agreement to be legally binding, the signature of both the landlord and the tenant needs to be appended.
Important Clauses and Policies in Every Lease
Depending on the terms and needs of the property owner, different clauses and policies might be added to a lease. The clauses, however, must meet the provisions in State Landlord-Tenant Laws.
Here are some important clauses that your property should cover:
- Subletting. This allows for the tenant to lease the space to another tenant and keep a share of the rental payments
- Property Access. The lease agreement should prescribe the frequency and conditions under which the landlord can enter the premises
- Lease termination. Violation of the lease agreement’s terms is grounds for termination
Addendum, Notices, and Disclosures
While you might have a detailed lease agreement binding both parties, there might be extenuating circumstances that require certain changes to be made in the documents. That’s where the addendum, notices, and disclosures come in.
- Addendum: An addendum can be interpreted as additional clauses to a lease agreement. To consider a wider demographic and protect the investment, a landlord can consider adding in fees relating to pets
- Notice: A notice is an official announcement made by either party. For example, when a landlord or an agent wants to gain access to the property, they must give a notice of at least 24 hours beforehand
- Disclosures: These are a legal requirement of every landlord. Disclosures are used to inform the tenants of certain aspects of the property. Common examples are the possibility of old lead paint or extensive foundation repairs done to the house
A detailed lease agreement sets the expectations of both parties since the tenant knows what is expected from them. In addition, it also eliminates financial and legal pitfalls. For a customized lease, call on the property management specialists at TruHome Property Solutions !
As a full-service property management company, the preparation and administration of lease agreements is part of our complete suite of property management services. Our team will work hard to attract quality tenants and maintain the property’s condition while streamlining other property operations. Contact us today to learn more!