Why A Written Lease?
It’s astounding how many landlords I talk to that don’t have a written lease. They’ve either inherited tenants with a property and the previous owners never had a lease, or they simply haven’t bothered getting one as verbal is so much easier.
Now, guess when I usually end up talking to these landlords?
If you guessed when they are having problems with a tenant you win a prize.
Here’s why you need a written lease. It takes away the gray areas!!
Verbal agreements are open for interpretation. Written agreements (unless they are poorly worded) close up the gray areas and lay out the rules, the resolutions and the repercussions that accompany the agreement.
Payments, Pets and Pot
Late payments, pets that tenants “acquire” and marijuana smoking seem to be the three big issues that landlords talk to me about. Having specific clauses or sections within your lease that explain these can make a huge difference in how these issues play out versus a vague verbal agreement.
For rent payments you should have specifics about when rent is due, possibly methods it can be paid via (cash, e-transfer, post dated check) and any repercussions if rent is paid late. This could range from fines or penalties to warning notices all the way to evictions.
Different jurisdictions require different wordings for fines and penalties. Some areas don’t allow penalties, some have prescribed penalty amounts for late payments and others leave it wide open. The important part is YOU need to know what your local rules allow and then you need to make sure your written lease includes the correct wording allowing you to enforce and collect any penalties or fines!!
For pets, depending on your policies and local rules, you need to include specifics about what is or isn’t allowed. If you’re rental unit is part of a Home Owner’s Association or Condo Association there may be restrictions on size or type of pet that you have to carry over to your lease.
You may have personal restrictions for a suited property due to allergies of current or future tenants (once you become pet friendly it is an expensive proposition to remove pet dander and fur to return it to a state that a person with allergies can comfortably live in).
You may have had bad experiences in the past that you simply wish to avoid repeating. Whatever your personal situation with your rental, your lease needs to reflect this as well and have it explained thoroughly!
Again, rules and regulations vary widely. Some regions don’t allow landlords to dictate pet polices and others have strict definitions. You need to be familiar with local legislation or you need to have a lease designed specifically for your area.
Pot, or marijuana oh my.
This has become a huge topic of controversy with landlords on one side of the debate and pot enthusiasts on the other. and unfortunately since it is a moving target right now there is no one answer anywhere it seems.
My personal thoughts are if marijuana helps you with pain, sleeping or other health concerns then all the power to you. I do draw the line though if it affects me and my property by adding risk or costs to my life. If you own your own property go for it. If you are renting, you need to fit in the guidelines established by the landlord, or you need to find a landlord that will work with you.
These risks or costs I’m referring to involve potential insurance issues with tenants legally allowed to grow their own product, renovation costs to repaint or repair burns that seem to accompany smoking of any products.
If you’ve been following The Educated Landlord on FaceBook I’ve posted several articles about marijuana, insurance issues and legislation changes recently along with other landlord articles from other sites on a nearly daily basis. If you haven’t liked us on FaceBook yet and want to keep up visit us at https://www.facebook.com/TheEducatedLandlord/
Marijuana legislation will be a moving target so it’s important you keep up with the regional rules and changes to rules that come into play as the rules become more relaxed federally, statewide and provincially depending on where you live.
The important message to take away from this is you may have to add additional wording to reinforce non-smoking policies in your property. If it specifies cigarette smoking isn’t allowed it may require a simple rewording not allowing smoking of any kind in the rental property. And if it’s written and follows your local Residential Tenancy rules it can be enforceable.
Where To Find A Written Lease
Depending on where you live there can be multiple different places or resources you can find to acquire a proper written lease for your rental property.
One of the first resources I recommend to landlords are local landlord or rental property associations. Many organizations, either as part of their membership or for a reasonable cost, can provide appropriate rental forms that are usually well used, well tested and that stand up to the local rules.
They often have additional forms you can use as well such as move in/move out checklists, applications and more that can be handy.
Another resource is your lawyer. If you already have a lawyer who you use and who has a good understanding of the rental laws for your area they can create (or acquire from other lawyers they know) a good dependable and legally binding rental agreement.
The caveats here are not all lawyers are created equal and not all properties are the same. By this I mean that some lawyers rarely deal in rental laws and they may be poorly suited to create a quality lease for you. Residential Tenancy Acts often have subtleties and loopholes in them that someone experienced with the specifics can tailor to work best for you and your property.
This can also vary with the property. Most specifically when it comes to condo boards and rules within leases as often condo or home owner association rules take precedence over Residential Tenancy rules. A proper lease must take both sets of rules into consideration and may need to be very specialized for you and for a specific property.
This can involve additional costs, but the long term protection it provides you are well worth that cost especially when you factor it over multiple years which should be your goal with a rental property anyway.
Another option, which I don’t really endorse, is off the shelf rental packages you can pick up in stationary stores. While far better than verbal agreements they are often very generic and if you’re new to rental properties they often end up lacking in several key areas (like smoking, pets and pot as mentioned earlier).
You can typically take these leases and use them as a starting point, but you may want to take it to your lawyer to get it tuned up so it works best for you rather than the generic masses. And if you’re doing this, why didn’t you just start with a a lawyer?
The final resource I’ll mention are the online legal document resources. These would would be through a company such as LegalNature who provide a wide range of legal documents that include not just leases, but everything from Wills to incorporation documents to bankruptcy forms..
To be entirely transparent I will receive a referral fee if you use one of the links in this article to register with them or to purchase a Residential Lease Agreement or other landlord document. If you’re vehemently opposed to me doing that, but still want documents you can simply Google them to go directly there.
I’ve talked to several of the guys over there and they have a very thorough and in-depth system in place that allows you to create a custom lease (or other various Real Estate forms) that you can save for future use (with their ongoing membership program) or download and use (with their one time purchase program).
Their leases are US based only currently and are customized depending on the state with the most current information regarding Residential Tenancy Laws for the particular state and region you’re creating the document for. They are also quite long as they cover so many details!!!
In my conversations with Ben and Trevor of LegalNature, their default Residential Lease Agreement will run between 14-18 pages which isn’t an issue you should regard as overwhelming, but rather as details that will protect you as much as possible!
Some landlords believe simpler leases are better, yet given the choice having a detailed lease covering almost every situation will benefit you much more over the long run.
Rules and laws regarding landlord, tenants and rental properties often change or evolve over time. If you’ve been using the same lease for more than a few years it may well be worth research to determine if any information in your older lease is outdated, un-enforceable or simply in need of updating.
Your Requirements For A Written Lease
Big picture, it doesn’t matter where you get your lease from, you simply need to make sure it protects you and your rights as a landlord and property owner, that it includes any particular wording or phrasing required under local rules to make it legal and that you understand it.
You need to understand it as you will likely need to explain it to future tenants as part of the lease signing process.
You can expedite part of this by emailing the lease in advance to your prospective tenants, once you’ve narrowed it down to one set of tenants, so they can review it and have any questions prepared in advance. However you’ll still want to go through any and all important sections in person with them during the signing though, just to reinforce their understanding and to ensure there is no miscommunication.
What may be abundantly clear to you (No pets, Landlords permission required for renovations and many other items that seemed clear to you), may not come across clearly unless you point it out during that lease review!!
As I mentioned right near the start of this article, you want to remove the gray areas, you want to avoid gaps in understanding and you want to have the most control possible with your documents so make sure you get a written lease that works for you.
If you’re still using an old lease or worse yet a verbal lease take note of the information in this resource so you can get that remedied and put some control back in your life as a landlord. I know I continually harp on this, but only because it’s important. You need to treat your landlording like a business, so make a smart business decision and get a solid written lease in your pocket!