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7 Rental Agreement Terms That’s Often The Source Of Conflict
The rental agreement contains the rules of business between the landlord and tenant.
In most cases, both parties would abide by the agreement without ever needing to point out terms, clauses, and footnotes at all.
Common problems between landlord and tenant can usually be resolve without ever needing to refer to the contract. And if need be, the words and statements in a basic rental agreement would set thing straight.
But sometimes, issues and disagreements can arise when things are left unclear.
Here are some common problem areas to look over and word carefully.
1) Rental due date
The reason why you want to explicitly state this is self-explanatory.
You have a mortgage to repay. And the bank will not entertain problematic tenants as a justifiable reason for defaults.
The problem is no so much as to landlords being vague in stating when rent is to be paid. But in enforcing it.
The more relaxed a landlord is at collecting rental on the stipulated dates, the more tenants would delay the payment.
Before you know it, payments falling weeks behind due dates can be a common practice.
To prevent this, consider inserting a term of interest for delays in payments.
Also don’t be vague in your language like:
- First week of the month
- Before the 5th of each month
- By the end of the month
Also. Crafty tenants might still delay paying rent even though you stated clearly that it should be paid on the First of each month as it falls on a Sunday or public holiday.
Your wording should expressly mention calendar days regardless of working days or not.
2) Guests and unidentified residents
Controlling the number of residents allowed in your rental property has nothing to do with you being a miser.
Having too many people in the house can have potential problems:
- More wear and tear of the premises
- Higher potential of conflicts between people living in a cramped space
- Insurance issues with unregistered residents
Moreover, you might not be comfortable with having your tenants sub-leasing the house to others without your knowledge.
The lease should always be specific in identifying the residents in the property even if they are family.
Just remember to be fair in limiting the number of people allowed inside.
Check with local laws before implementing these terms.
Maintenance can be a touchy subject to tenants because it could be a primary factor driving them to renting instead of buying a house.
If you ask your tenants, probably 9 out of 10 would prefer that they have no responsibilities with maintenance works.
Yet as a landlord, you don’t want to take on the added tasks of caring for the lawn, servicing the air-conditioning, cleaning the pool, etc.
However, most renters will implicitly understand that if they choose to rent a house with a yard… that they will need to care for it.
Otherwise, they probably would rent an apartment in the first place.
Of course, you could be on a mission to win Landlord of The Year and offer to do the maintenance on your part.
In the event that you want tenants to assume responsibility of maintenance, it need to be spelt out clearly what tenants are responsible for to avoid conflicts arising from miscommunications and misinterpretations.
4) Work for rent
Sometimes tenants might offer some form for work in exchange for discounts, rebates, or offsets from the rent.
If you run into these situations, it is an alert sign that problems with the relationship is on the horizon.
Some landlords even anticipate this and are fully prepared to offer rent offsets stated in the contract.
For example, the rental being $2000. And a yard maintenance rebate of $150. Making the total payable $1850.
Making such deals are just inviting future trouble.
Firstly, it should already be a warning when tenants are not fully prepared to pay full price.
Secondly, you are probably hiring people to mow the lawn anyway.
Thirdly, it is already in your right to demand tenants taking up responsibility.
What if they get injured? Are they now considered your staff? What if they ask for a raise?
And then who is to say that your tenants would do a good job… or even do anything at all.
Don’t make a simple landlord-tenant relationship complicated.
5) Vehicles on property
The more cars there are on your property:
- the bigger the visual mess
- the higher the potential of repair works going on
- the better the chances of damages made by vehicles on the property
- and the higher the chances of accidents
While it’s unfair, and maybe even illegal to ban tenants from having vehicles, it’s fair to insert a limit to the number of vehicles allowed on the premises.
Problems regarding this issue don’t often come up. But when they do, you would be thanking your lucky stars that you have this limit imposed.
6) Security deposit
The security deposit is such a key element of rental real estate that there are laws written just for it.
There are 2 main factors to handling security deposits.
- Application towards rental
- Conditions for return
Here’s a brief explanation.
Application towards rental
Because the amount of security deposit is often a multiple of whats equivalent to a month’s worth of rental, tenants often request for the final month(s) rental to be directly deducted from the deposit.
While this can seem like banking in the cash on the surface, agreeing to it can present some problems.
Because if upon move-out inspection, you realize that there are damages to the property that the tenant is liable to pay for, there would be no more security deposit to deduct those expenses from as the balance has already been clocked in as rental.
By the time you formally demand damages from the tenant, he would already be long gone.
Good luck finding him or taking him to court.
Conditions for return
A big problem that still exist today is that tenants still don’t understand the actual purpose of the security deposit.
They either think that it can be used for rental as indicated above or that they would get everything back in full upon the termination of the rental agreement.
But from the landlord’s point of view, security deposit’s intent is to serve as a safeguard to claim damages to property.
Therefore, the conditions governing the security deposit should be clearly stated. Including under what circumstances will money be deducted from it.
7) Early termination
There are various reasons why tenants might want to be released of their contract obligation early.
This occurs frequently in commercial real estate where the company leasing the premises are closing shop.
It also happens often for residential property.
Whatever the reasons for early termination, there must be clear guidelines or rules about what has to happen in order for a tenant to vacate the premises without any financial obligations.
Some landlords would forfeit the security deposit as long as the terms of contract allows it.
Some are open to the idea as long as the tenant can find a new tenant to takeover the remaining period of the contract via an assignment.
Because at this stage, get ready for every play in the playbook as tenants’ behavior could be driven by emotions.
It is therefore best to have processes and protocols for early termination clearly stated.