Today, let’s talk about the rental agreement or lease, which are synonymous terms. A rental agreement includes the terms and conditions that will govern the occupancy, including the length of time, the amount of rent, and when the rent is due also the amount of the security deposit.
Rental agreements may be oral or written, however, it is strongly recommended that the parties have a written rental agreement. Oral agreements are unenforceable if they are over a year and can make things very complicated if there’s ever a dispute. So please have all your rental agreements in writing.
There are two main types of rental agreements: fixed-term and periodic-term. A fixed-term agreement is for a set amount of time and has a defined expiration date, such as a one or two-year lease.
Advantages and disadvantages of a Fixed-term Lease:
- The tenant and the owner are obligated to each other for the entire term.
- The rent amount is fixed until the expiration date or scheduled increases within the agreement. They must be detailed and agreed upon.
- The property owner can not terminate the agreement unless the tenant breaches the terms of the agreement.
- The tenant is liable for rent until the end of the term or until the unit is rented to a new tenant.
- Once the fixed term expires, the owner can request the tenant to vacate with proper notice.
- If no notice is given, the fixed term rolls into a periodic agreement until a new agreement is signed.
A periodic rental agreement is for successive periods of time, such as week to week or month to month. This agreement does not have an expiration date. The rental agreement will be effective for the length of time the tenant continues to pay rent and the landlord or tenant does not provide proper notice of termination.
Advantages and disadvantages of a Periodic-term lease:
- Either party can terminate the agreement with proper notice.
- Rent can be increased up to twice a year, with proper notice.
- There’s no expiration date, the agreement continues to roll over.
On filling out a rental agreement
Many property management companies and landlords use preprinted forms for their rental agreements. There are no standard rental agreements that are required. Most agreements have terms that are only enforceable if the box is checked, while in others the blanks must be filled in. Therefore, you must use extreme caution when reading through and understanding the entire document before signing.
Take special note of any checkboxes or blank lines that are not filled out. It’s never a good idea to leave any relevant blanks not completed. If it does not apply, then you should put NA.
On writing a rental agreement
When writing a rental agreement, make sure that it contains all the promises between the property owner or agent and the tenant. It should not contain anything that contradicts any agreements that were made verbally. If the rental agreement refers to a separate document such as tenant rules and regulations, make sure that there is a copy, and that the tenant has read and signed that also.
Double-check all rental agreements. Make sure they are easy to understand, and every term has been laid out specifically. If a rental agreement is hard to understand, then it may have difficulty standing up in a court of law.
Key terms that should be contained in a rental agreement:
- names of the landlord and the tenant
- the address of the rental unit
- the amount of rent
- when to pay the rent, to whom it should be paid, and where it should be paid
- the amount and purpose of the security deposit
- the amount of any late charges or return check fees
- pet policies
- number of people allowed in a unit
- attorney fees collections in the event of a lawsuit
- who’s responsible for utilities
- who’s responsible for yard care
- any repairs promised at the beginning of the lease
- maintenance and repairs reporting process including emergency numbers
- whether a tenant can sublet or not
- conditions the landlord can enter the unit
- name address telephone number of the authorized manager to receive legal notices
- if permitted to make rent payments in person, including days, hours, and an address to drop it off
- the form in which rent payments must be made
- an amount of coverage if rental insurance is required
- required disclosures including bed bugs and flood hazards
The lease agreement should also contain an addendum including the rules and regulations or have it put in the agreement. Some examples of rules and regulations that should be included would be if a tenant must park in a certain place, if storage is available or if there are any quiet hours, and if smoking is prohibited. This is just an example, there may be other terms in the rules and regulations also. If a tenant breaks any of these rules, it could be grounds for eviction.
It is important that both the owner of the rental unit and the tenant have signed copies of the rental agreement. These documents should be kept in a safe place and never discarded until after the statute of limitations from the time the tenant moves out. Tenants are entitled to receive a copy of the lease from the property owner every calendar year upon request.
I would recommend that a lease agreement be renewed annually, It should never go out more than two years before renewing a lease agreement. In my years in real estate, I have seen where property owners have not renewed leases for over 10 years. At this point the rent is normally way below market, the property is substandard, and neither owner nor tenant can find a copy of the lease. This can lead to trouble if something were to happen.
Always be prepared.
