20 Key Items You Should Know In A Residential Lease Agreement

By on October 5, 2013

If you came into the landlording business with a sadistic intention to make the lives of tenants miserable, you are in the wrong business. The “power” you hold by owning someone else’s home is not to be abused. With great power comes great responsibility. Saying this, you will be a fool to not protect yourself from rouge tenants who purposely misrepresent and misinterpret everything you say. This is why lease agreements are your assets and protects you from devilish tenants. Here are 20 key items for your tenancy lease agreement.

Note that laws differ from country to country and state to state. This is a general guide. You have to check your local legislation to find out if the terms you include in an agreement is legal and enforceable.

1) Parties. Every adult who will be living in your apartment should sign and endorse the lease agreement. When more than 1 party signs an agreement, they effectively become cotenants. This means that they are both responsible for the terms stated in the contract. Also state that the tenants are jointly liable for breaches in the agreement. This is so that when a tenant leaves, the remaining signatories will be responsible for overdue rentals and charges.

2) Address. This is where you state clearly the street name, postal code, block number and unit number of your property. Do not use short forms. If a tenant plays punk, he can dispute the credibility of the agreement just because you stated the wrong address.

3) Limits on use. Use this section to state who are the occupants of the property. List down the names of all parties including children. Occasionally, tenants may have friends or distance relatives visiting them and might stay over for some time. To prevent free-riders from living in your property for free, state the maximum number of days a guest can stay in the home. If need be, include a daily rate that the tenant has to pay when guest stay beyond the number of days allowed. The more people living in a home, the more wear and tear.

lease agreement key points4) Period of lease. This indicates the period of time that the agreement is in force. When you are on a rolling month to month contract, remember to indicate the notice period that has to be served by the tenant to vacate the place. For longer term leases, be shrewd and stipulate that the tenant will be liable for rental on the entire period agreed if they decide to leave prematurely unless they can find a replacement tenant.

5) Payment. State clearly that rental has to be paid on the first day of the month or whatever day you prefer. Overdue rent will be subject to interest charges or a penalty fee. This is where you also indicate whether payments should be made by cheque or cash or bank transfer. To encourage early payments, you can offer a small discount if tenants make payment 5 days before the payment date.

6) Disclosures. This part is where you disclose any information that relates to health and safety hazards in the home. For example, lead-based paint can be dangerous especially when there are children living in the home. Disclose these information to the tenant and this term show that you have done your job.

7) Penalties. This is the section where most tenants quietly complain about. Not that you are a lurking shark wait to grab a bite at an unsuspecting tenant. But if you do not look out for yourself, no one else will. You certainly cannot expect tenants to look out for your best interest. They have their own interest to look after. As stated in previous point, the most common penalties for late payments are charging an interest or a flat late payment fee. Remember that the point of penalties is to deter tenants from paying late. Not to make an extra income. So decide on a way to achieve that objective. You are not in the business of late payments.

8) Deposit. This is where you state how much deposit is required. It is common practice to request for a sum which is a multiple of the monthly rental. You can use a fixed amount that is not linked to the rental. But surely stipulating a higher deposit will scare some tenants away. You will also have to state what criteria has to be met for the safe return of the deposit. On top of that, as the landlord, you have to clearly state under what circumstances and for what type of costs can the deposits be used for. Deposits cannot be used to defray rental owed. Remember that this is not your money and you cannot use it for any reason you deem fit. Everything has to laid out in the contract. If you are to sell your property to another investor, the deposit has to be transferred to the new landlord.

9) Assignment. Assignment basically mean that the tenant has the right to let a new tenant take over the lease and live in your apartment. So you must expressly state that any assignment has to have your final approval. This is so that you can screen the new tenants and judge whether they are the type of tenants you want.

10) Subletting. Imagine your tenant renting the whole house from you and then subletting individual rooms out to colleagues and friend. They make a profit out of you. If you are going to be a nice guy and allow subletting, at least include a clause indication that your approval is required for any new tenants.

11) Utility bills. Sometimes landlords pay the utility bills and sometimes tenants pick up the tab. The is no right or wrong way to go about. Just remember that when an agreement has been reached on who is liable on the utility bills, include it in the lease document.

12) Inspection. As the owner of the property, you have to right to enter it for inspection. But as a tenant who is making the place home, he has the right to his privacy. To prevent awkward or confrontational situations from brewing, state that you can enter the property during stipulated time windows. For example, Fridays between 2pm to 4pm.

13) Furniture and items. This section should list down all the furniture and electrical items in your property. The tenant should do a check to ensure that they are in reasonable working condition. This is so that when things go missing or damages are discovered, you can come back to the lease agreement to declare that the items were present and in working condition when the tenants took over the apartment. This can eliminate fiery lease disputes.

I didn't do that

I didn’t do that

14) Causing disturbance. The last thing you want is for your tenants to make a nuisance of himself to the neighbours. Tenants are not allowed to use the premises for illegal activities and disturbing the peace in the neighbourhood. Doing so is a cause for lease termination.

15) Termination. You judgment that the tenants is an angel could be wrong. It might just as well turn out that you receive 5 calls a day from neighbours complaining about him. In this section, you include a clause that allows you to terminate the lease should the tenant breaches the terms stipulated in the agreement. You will of course have to include a notice period.

16) Extended absence. Tenants are to notify you in advance if they are going to be away for an extended period of time. You can make this a requirement for anything more than 5 days. And you have the right to enter the property during this time for maintenance and make repairs.

17) Abandonment. In case the tenants just abandoned the property without a sound, you will have the right to repossess the property and put it back on the market.” All outstanding rental and costs are liable. You will have the right to keep or sell all personal property after a certain time period. To reclaim his belongings, he has to settle all outstanding obligations.

Something tells me the tenants has abandoned the property

Something tells me the tenants has abandoned the property

18) This agreement only. This term states that all agreements between landlord and tenant is stated in the lease. It is the entire agreement. This prevents situations whereby tenants insists that you promised something in conversation but did not deliver. Every term is expressly stated without any implied terms. Imagine trying to prove something that was said orally in court.

19) Term validity. If you run into a smart adversary, he can play the card where one invalid term renders the entire contract invalid. To protect yourself from such an ace of a card, include a line that states “If any portion of this Agreement is held to be invalid, its invalidity will not affect the validity or enforceability of any other provision of this Agreement.”

20) Indemnity. You will want a clause that indemnifies you from acts of negligence by tenants or third party guests that cause injury or death to any person residing in the property.



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