In the past few posts, we’ve been taking a look at prudence – one of King Solomon’s essential virtues for successful investing. “That thy ear may hearken to wisdom: incline thy heart to know prudence,“ he says in Proverbs 2:2. For income property investors, a customized lease that covers all aspects of a rental property is a prudent way to avoid tenant issues and even legal troubles
Leases are legal documents, laying out the terms of an agreement between landlord and tenant that will, if done correctly, hold up in court. Form leases, because they’re designed to be one size fits all, cover basics like rental amount, term of the lease, penalties for breaking the lease and other obvious points. There’s even a space to add other considerations. But, housing experts caution, thee forms don’t take into consideration the unique issues involving a specific property, and specific points that need to be covered to protect both parties.
If the lease doesn’t mention it, it’s hard to enforce it. So advocates of custom lease agreements suggest taking a moment to think about what the issues are surrounding the property and the people who will be living in it. Issues to consider when writing a lease agreement – or having one written – include:
The names of all tenants. This establishes who has a legal right to live on the property and protects the landlord against long-term “squatters,” friends or relatives who may show up and never leave. This also establishes that each named individual is responsible for rent and any other applicable fees.
Prohibitions about illegal activity. This seems like a no-brainer — but spelling out the kinds of illegal activity you’re prohibiting makes enforcement easier and helps to avoid complaints and lawsuits from neighbors –as well as your own liability if, for example, the house is raided for drugs.
House rules. Establishing what is and isn’t acceptable in the house can save headaches later on. If you don’t want pets, smokers, loud music, or additional people in the house, the lease is the place to spell that out. Setting up clear house rules is your right, unless those rules violate fair housing laws.
Responsibilities. A comprehensive leas is also a place to spell out clearly who’s responsible for what around the property. Making that division of labor clear on the lease can avoid complaints and even legal action. If you expect tenants to shovel snow from the sidewalks or keep the yard clear, the lease allows you to make that clear. Otherwise you may find yourself in an ongoing battle with the tenants about getting things done.
Special considerations about the property. A form lease may not cover issues that are unique to the property in question. If there are specific considerations relating to the property itself, it’s essential to establish what those are in the lease or rental agreement.
Landlord-tenant disputes cost millions each year in legal fees and judgments. Eviction processes can be costly, too – and can take months to resolve. A well-crafted lease created with the help of legal and real estates professionals can’t anticipate every issue. But it can help landlord/investors protect themselves and the income property they’ve worked hard to acquire. (Top image:Flickr/emilystaubert)
“Ten Terms to Include in Your Lease or Rental Agreement.” Nolo Law for All. Nolo.com 9 Aug 2013.
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