Renting a home to others requires you to take steps to protect yourself and your investment. A good lease or rental agreement lays out all of the rules and expectations tenants must follow if they wish to continue to live on your property.
The tenancy agreement is not only a contract but is also where you offer crucial details such as how much you expect to be paid each month, what can be done to the property and even what penalties exist for not honoring the contract as stated.
You can make the contract as detailed as you like, but there are several basic terms you should include in it. Use the following steps to create a good basic rental agreement.
Step One: Put All Names on the Document
Find out who will reside in the home or apartment and make sure all names are listed on the contract. Even if the primary individual is the one paying the rent, you need to know who else is going to be staying in the physical property. All members of the household, aside from children, need to sign the contract. In legal terms, this makes them all liable for the rent, and you can seek rent from any of them if the primary payer should miss a payment or is unable to pay. Additionally, if one tenant violates any part of the contract, you can terminate the tenancy for everyone if necessary.
Step Two: Terms
Decide whether you want to set the rental as a month-to-month rental or a fixed-term lease. Many leases last for six months to a year, and a month-to-month lease generally self-renew at the end of a set period of time unless either you or the tenant terminates it. Decide how long you want someone to stay and how flexible you want to be in the arrangement.
Under terms, you must also state the amount the renter must pay each month for rent, as well as when it is due. You can also outline how it is to be paid and what form of payment you accept. Will the tenant mail the rent check to you, or do you come by to collect it each month? Can she or he pay digitally using PayPal or another payment medium? Spell out late fees and when they are charged, how much the late fees are and whether or not there is a grace period.
Make sure to include penalties for payments that default. In this section, list the security deposit amount you expect and what it may be used for. List under what circumstances the deposit is returned. Make sure you state that the deposit cannot be used against the last month’s rent. In some states, you must list where the security deposit is held and how the interest on that deposit is to be used. Make sure you list whether utilities are the responsibility of the renter, or if you are covering some part of it.
Related Article: Your Landlord’s Responsibilities
Occupancy should also be spelled out in the terms section of your contract. Clearly state the residence is for permanent residence only for those who are listed on the agreement.
This allows you to limit the number of occupants and ensures you know who is living there. It also gives you grounds to terminate the contract if a tenant invites a relative to move in or sublets your property without getting permission from you first.
Step Three: Repairs and General Maintenance
One of the most common complaints from renters often deals with landlords not maintaining their properties. In general, this boils down to a lack of adequate communication by the landlord as to which maintenance activities and chores the renter is responsible for and those the landlord covers. To avoid hassles, make sure the contract lists your responsibility toward keeping major structures and grounds safe, as well as requiring that the tenant keep the premises clean. It should also clearly state that the tenant must pay for damage caused by his or her negligence or abuse. Make sure you define what is considered damage and what is considered normal wear and tear.
List your procedures for contact in the event something needs attention or repair, and make sure your tenant understands he or she cannot make major alterations to the home. This includes changing locks, painting or putting up a fence. List how much advanced notice you will give in the event you need to come to the property. This gives you legal right of entry and avoids a violation of privacy.
Step Four: Pets
If you decide to allow pets, identify any special considerations or limitations on size or type of pet. Also make sure you make a note of how many pets are allowed in the home. Make sure the owners are aware they are responsible for cleaning up animal droppings out of the surrounding area and cleaning anything the animal soils or damages on the inside. If you do not allow pets, make sure you clearly specify this.
Step Five: State Restrictions and Laws
Each state has its own laws and regulations concerning tenancy. In some states, there are rental control ordinances to which you must comply. Other states have safety, antidiscrimination and occupancy laws. Tenants’ rights are included in these regulations and offer specific reasons and procedures for proceeding with an eviction.
You may also have to place a clause in your contract pertaining to types of businesses a tenant can run from the home, and in the case of shared spaces with neighbors or access to amenities, what the tenant can utilize and what is off limits. Make note of how much can be stored on the property and what types of items cannot be kept on the property.
In this last section, you must place a clause concerning tenant activity on the property and what the penalties are if the tenant engages in them. For example, if the tenant is loud and disruptive to the neighborhood, what would happen? This is also an important clause to have in case the tenant begins to engage in illegal activity on the property, such as dealing drugs.
Related Article: Renting Terms Explained