First and foremost, I am not an attorney and you should consult an attorney before changing any language in your standard lease. Edits to your lease will vary based on the type of property and location. Here are the top 6 items you don’t want to forget:
Be sure this is established in your lease so the tenant is aware of how and when you or your maintenance team may enter the property. A standard lease typically states 24-hour notice to be given, unless an emergency occurs. Also be sure your lease includes a clause stating you may show the unit to potential prospects while the tenant is still occupying the property, typically the last 30 days of the lease.
This is a no brainer and needs to be included in the lease. However, most tenants browse over the lease and don’t read through all terms. We add a “summary page” at the end of the lease to highlight terms such as the deposit, rent and total move in cost.
Utilities play a significant role in your investment. You want to be clear when explaining utilities to tenants. Our properties vary when it comes to utilities – most of the time we require gas and electricity be put in the tenants name and bill out water and trash. You need to make sure the terms in your lease about utilities are clearly defined in case you have a problem with a tenant claiming they didn’t know they had to pay for utilities. Sometimes third party agents forget to give details to their clients and it can cause some frustration later down the road. Billing back utilities to tenants plays a significant role in your cash flow or NOI. We also add utility info in our lease summary page as well as text the tenants prior to their move in to remind them.
This section includes any terms about quiet hours, trash being left outside, keeping units clean, etc. There are a number of things you may want to add in here. We always recommend using the standard state leasing agreement and if you plan on making any changes, consult an attorney first.
Most standard leases state a tenant can only end a lease early due to circumstantial events such as military leave or violent crimes. We recommend adding verbiage about the monetary amount a tenant must pay if they terminate their lease early. We typically require two additional months to be paid after the tenant moves out. So let’s say a tenant moves out at the end of December and their lease is not up until May - we require January and February rent to be paid. The most common example we see is for job relocation. When tenants ask, we refer them to the part in their lease, which states they must pay two additional months rent to leave early. In this case, you typically see the company the tenant works for pay for their early termination fee. Most of the time, unless a company is paying for it, the tenants end up staying because they don’t want to be out the money for the additional two months.
To avoid hassle and possible confusion, outline what items you will take care of and your tenant will be responsible for. Be sure to outline any restrictions such as allowing your tenant to add a built-in or paint a room. We require our tenants take care of AC filters, flipping breakers, etc. The tenant is responsible for any damage caused by them. A common example of this is when tenants put something down the garbage disposal that’s not supposed to go down a garbage disposal. Such as kitchen towels, chicken bones, spoons, rocks. We let them know in their lease they will be responsible for these damages.
There’s a lot of important information in a lease. You want to read through it multiple times and familiarize yourself with state laws. Also, be aware of addendums you can add to your lease. Most importantly, understand that a lot of tenants don’t typically read all 20 pages of their lease. It’s important to highlight the important items to them and be sure everyone is on the same page.