The lease. It’s the center of your rental agreement with any tenant and is thus the most important thing for you to put time, energy, and money into developing properly. Even if you have a good verbal relationship with a prospective tenant, nothing can protect both theirs and your rights as well as a properly completed lease.
Many new and even more seasoned landlords rely solely on sample leases found online to complete their rental transactions. While these documents can be incredibly helpful, it is also important that you take the time to study and learn how to write a lease agreement.
Putting this important document together yourself will not only help it to specifically fit your company, property, and management needs, but it will also give you a new perspective on managing your properties.
There are many things in the lease that can help both you and your tenant gain a clearer understanding of your agreement. Today, we’ll move through the most important steps of how to write your own lease.
Before we talk about writing your lease, let’s create a brief definition of what a lease is.
A lease is a document that details the terms and conditions for a specific occupation period of a property owned by a landlord and occupied by a tenant.
Often, you will see the words lease and rental agreement used interchangeably.
A rental agreement is a document that applies to a specific, short rental period. Usually, this is for 30 days. This type of document auto-renews at the end of each 30-day cycle until the tenant or the landlord terminates the agreement. The terms can be changed from month to month with agreement from both parties.
A lease, on the other hand, is a single contract that dictates the terms for a longer period of time, often six months or one year. This contract can be renewed but usually must be resigned at the end of the initial lease period. Alternatively, a lease agreement can automatically turn into a rental agreement, which renews every 30 days at the end of the original lease period.
As you can probably already tell, lease and rental agreements are quite complicated. Having an ironclad lease agreement is important because of those complications.
If you don’t have a clear lease agreement and instead rely on verbal agreements between you and your tenant, anything that goes wrong in the landlord-tenant relationship will be incredibly hard to pursue or challenge in court.
Bad tenants, for example, will be hard to hold accountable for not paying utilities or damaging your property if you do not have a signed lease that details their responsibility for doing just that. If you have screened your tenants thoroughly , you might not see this problem, but even then some bad eggs can sneak through.
A strong lease agreement will help you build a stronger bottom line. And that is why you are going to learn about writing a great lease agreement today!
Before we get into the specifics of how to write a lease agreement, there are a few essential tips that we want to mention. Keep all of the following in mind as you work on your lease:
The first thing that you should do is set up the outline of your document. Start with the title. Simply using the words “Lease Agreement” as the title is enough. This should be large and center on the top of the first page.
Then, you will want to set up the overall format of your document.
For easy readability and to help logically organize your lease, we recommend that landlords section the enter lease using headers and subheaders. This simple method will make sure that everything is clear and easy to follow.
We suggest the following headers for your lease agreements:
Remember that you can always add another heading later if you have too many subheadings. For now, using these headings should be a great starting point.
Now it’s time to consider some important questions about your lease. What issues do you want your lease to address? What issues were addressed in the sample leases that you viewed?
Consider what your ideal lease would cover, and then write all of these provisions down.
Once you are done writing them, separate them into categories and list them under each topical header in your lease.
In step 3, we will show you our recommended standard provisions and more detailed information about why you should include each one of them.
Once you have made your lists, you will want to add detail to each provision. This is called creating a clause. Each clause of the lease will give important, legally binding information about each related heading or provision.
If you want the provision to be laid out for the tenant as well as legally binding, you need to include detailed information about what the rules are going to be. Below, we will introduce our headers, standard lease provisions, and the key points to include with each of them.
Property-Identifying Information
You will want to include all of the following information to identify the property completely and thoroughly so that there is no confusion:
Party-Identifying Information
Next, list the names of all tenants as well as their contact information. Identify them as “tenant.” Then, include your name and contact info, identifying yourself as “landlord.” The terms “tenant” and “landlord” can then be used for the rest of the lease in lieu of any names.
Term of Lease
This section should include information about how long the lease period is and the specific dates when the lease will be in effect. Usually, residential leases are written for one year periods, but they can range from only three months up to a few years.
Some local laws may restrict the lease period that you can write into an agreement. If this applies in your area, make sure that you comply with local codes.
Renewal Procedure
Do you or the tenant want the lease to renew automatically? Or will the tenant need to give you notice if they want to renew?
You should include details of the renewal procedure in this section. Be sure to give yourself the power to not renew the lease for any reason.
This section should also explain how much notice the tenant needs to give to end or renew a one-year lease. Usually, the minimum requirement is 30 days. For longer leases, area laws may require 60-days notice.
Rent Amount
Detail the rental cost and what day it is due on. Leases typically include the grace period, such as seven days, during which the tenant can still pay rent. This is not legally required in most states.
Additionally, detail the accepted forms of payment. For example, you may require that a tenant pays by check or money order for a firm paper trail. All of the information related to rent should be included in this area.
Late Fees & Applicable Penalties
How much will you charge if there is a bounced check? What are the late fees for paying late rent? What penalties will occur if the tenant doesn’t pay rent on time? What notices will you send to them, and when will you file for eviction for the nonpayment of rent?
All of this information should be included in this section. Remember, the answers to these questions may depend on where you live. Most states have rules about what type of notice and how many days of notice you must give to tenants before filing for eviction for the nonpayment of rent, so ensure that your lease is in line with those laws.
A security deposit is a lump sum of money that is held by the landlord in an appropriate place as collateral for any potential damage to the property. At the end of the lease period, the landlord can use the security deposit to fix damages that are outside of normal wear-and-tear.
In addition to including the amount of security deposit to be collected, you will also want to include a definition of what will be considered damage and what will be considered normal wear-and-tear. This can be confusing for tenants, so it’s best to outline it clearly in the lease.
Some states have laws about where security deposit money will be held during the tenancy and whether or not interest can be collected on it. According to your local laws, be sure to include information about how the deposit will be kept in the lease.
Finally, let the tenant know in the lease when the security deposit will be returned. There are usually state laws about how long you have to assess damage, make repairs, and return any remaining deposit money to the tenant after they move out.
This section can be short and sweet. State who will be responsible for what utility bills. If any utilities will be split between units that share utilities, include detailed information about that arrangement here.
This section of the lease should explain who is allowed to be on the property , how long guests can stay at the property, and whether or not you will allow subletting. Generally, we recommend that you do not allow subletting unless there is a strong reason to do so.
While living on your property, tenants have the right to their privacy and to use the home as they place. On the flip side, they also have a responsibility not to damage the property or break any laws on your property.
Any and all limitations on what a tenant can do on the property should be listed here. For example, you may forbid the following:
All specifics on what can or cannot be altered should be included. Temporary changes can be allowed as long as the tenant undoes any such changes before they move out. Additionally, let the tenant know if you will require them to carry renter’s insurance, which we do recommend doing. This insurance protects both you and your tenants.
Some of the following may seem obvious, but you will also want to include these provisions:
The tenant is not the only one who is going to be granted rights and responsibilities by this lease agreement!
You as the landlord also have a number of duties . These duties are prescribed to you by local landlord-tenant law, but it is good practice to include a reiteration of those duties in the lease to help the tenant understand.
The main thing that you as a landlord are responsible for is to maintain the property in a livable condition. You may also be required to make certain repairs within specific timeframes after they are reported to you. If that is the case according to your property’s governing law, outline those time ranges here.
Entry to Property
Landlords have the right to enter or inspect their properties at any time, but you must give the tenant notice according to local law. Include information on those laws here as well. Providing proper notice protects you from privacy lawsuits, so be sure that you enact and follow the appropriate regulations.
Federal and state governments both have some required disclosures that must be given to the renter before they sign any agreement to occupy the property. To prove that you have given these disclosures to the tenant, you should include a disclosures section that states as much in your lease.
Canceling The Lease (Tenant)
Explain valid circumstances for ending the lease before the end of the contract term. Include the following information:
Lease Termination (Landlord)
State the reasons that you as a landlord can terminate a lease agreement early. This can include (but are not limited to):
In addition to explaining each of these reasons, you must also include information about the process that will happen if you decide to terminate the lease for any of the above reasons. This includes giving notice, what that notice will include, how long the tenant will have to reply to the notice, and when you can file for eviction with the courts.
Before you finish the lease, be sure to include a clause that states the governing law that the lease follows.
This clause should also include a stipulation that if anything in the lease is at odds with the governing law, the clause from the governing law can and will replace the incorrect clause in the lease without invalidating the rest of the lease agreement.
Speaking of governing law, remember when we said to gather law references? Now is the time to use them!
We mentioned a few times that you should check your local legislature out to put in the right information, but you will want to sit down once again and check the lease in its entirety for any inconsistencies.
A lease agreement must be signed to be legal! You, the landlord, and all tenants that will be staying on the property need to sign and date the agreement.
In addition to the standard provisions that we covered in the how to write a rental agreement section above, there are always going to be more addendums that you could add to your lease.
These are the top seven addendums that we recommend landlords consider adding to their lease.
Include a detailed list of what appliances will be at the property, their condition, and who will be responsible for their maintenance. This will ensure both parties are on the same page.
What will happen if the tenant leaves the property or moves out without notice? All penalties, fees, and legal provisions for this scenario should be detailed in this addendum.
In this provision, give the details of what type of expedited lease termination can occur should the person be deployed or relocated.
Including this addendum will explain what would happen should you decide to sell the property during the lease period.
If you will allow pets on the property, it’s important to include a detailed clause about the types of pets that are allowed, what kind of pet-related fees will be charged, and how damages caused by pets will be paid for.
If your property has many locking doors, security provision, or other gate-type enclosures, it might be a good idea to include an inventory of what keys and passwords are being given to the tenant to ensure proper collection at the end of the lease period.
This addendum can require that the tenant let you know about any long absences so that you can check on and secure your property.
You’ve done it! You’ve learned how to write a lease agreement from scratch. There are a lot of things that you need to work on to get a great lease together, but it should be simpler now that you have this guide.
Remember, work through the document gradually:
That’s all it takes! Once you have a great base lease written, you can use the same document over and over again by just making simple modifications. Take the time that you need to make the lease agreement great the first time around, and you won’t have to do much after that!
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