When you find a new tenant for your rental property, you need to agree on some terms of the deal: when the tenant can move in, how long they can stay, and how much they’ll pay in rent each month. But how do you go about formalizing the terms and what’s included?
If you’re renting out a property for the first time and need to write a lease, you’ll find everything you need to know in this beginner landlord’s guide to lease agreements.
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A lease agreement (frequently shortened to just “lease”) is a contract between you and your tenant that sets out the rules for their tenancy. The lease will define what you agree to provide to your tenant and what they agree to pay in return.
A lease agreement is most commonly a formal document, although a verbal lease agreement is still legally binding.
At a minimum, your lease agreement needs to spell out who is entering into the agreement, describe the property being rented, state how long the lease is for, and give details of what rent will be paid.
However, you’ll probably want to include much more detail in the lease to protect yourself against bad tenants and potential conflicts. As a starting point, include sections on:
When it comes to rent, the lease agreement should include:
Signatures. Finally, provide a space for all parties to sign the lease. Leave room for each signature to be dated and witnessed.
A lease agreement can be as simple or as complicated as you want. In its most common form, a lease agreement is a formal document that’s signed by the landlord and tenant. A verbal agreement is also considered a valid contract and, while much harder to enforce, can constitute a lease agreement.
If you’re comfortable writing your own lease agreement, you can sit down at your computer and type out everything you want your tenant to agree to. You can even hand-write it if you want. There are online services that offer templates for free or a small fee to help you get started.
That said, the lease is your best protection against a bad tenant. And, when you’re investing as much time and money as you are, it’s important to make sure you’re protecting yourself and your property.
For the best results, have a real estate lawyer draft the lease agreement for you. Your lawyer can make sure the lease complies with local and state laws and is worded in a way that can be enforced.
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As a landlord, there will be times when you want to break the lease. Unfortunately, the lease is a contract between you and your tenant, and just as the tenant can’t unilaterally decide to break the lease, neither can you. Fortunately, you do have some recourse to get out of a lease if you need to.
When you rent out your property, you’re entrusting one of your biggest investments to another person.
Having a well-written lease agreement in place ensures that your tenant is aware of their obligations to you. It also gives you recourse to enforce the rules if and when problems arise. Take care when drafting a lease agreement, and have your lawyer review it to ensure it can be enforced.
As a landlord, you’re well within your rights to write your lease agreement. However, you should be aware that a lease is a legal contract and is only as strong as your ability to enforce it. The cost of having a lawyer draft or review your lease agreement is well worth it for peace of mind.
Can a landlord cancel a lease agreement?No, a landlord cannot cancel a lease agreement. Just as your tenant can’t cancel the lease agreement and take away your income source, you can’t cancel it and take away their home. However, you can include clauses in the agreement that give you the ability to evict the tenant in certain circumstances.
My tenant and I have agreed to terms that differ from the law. Is my lease enforceable?Your rental property and the lease agreement are governed by local, state, and federal law.
According to Nolo.com, any clause within your lease agreement that is contrary to the law will be unenforceable. Other parts of the contract will usually still be enforceable, but a judge may choose to tear up or rewrite the entire lease if they find it to be unfair or if they believe it was made in bad faith.
Saad started his career as a Certified Public Accountant (CPA) working for a top-tier accounting firm. He was responsible for helping audit alternative investment funds. He later worked at a hedge fund where he was responsible for preparing financial statements and implementing new technology. He also ran a successful private tax practice for five years. After completing his MBA at Duke, Saad joined The Boston Consulting Group to do management consulting. At BCG his experience spanned several industries and growth projects across Pharma, Retail, and Technology companies. His passion for democratizing finances led him to Plaid, a fintech, where he worked with large Banks and Financial Institutions to make finances and money easier for all.
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