Most great landlord-tenant relationships hold one key element in common: they’re built on the foundation of a concise, airtight lease. Like any other type of legal contract, the goal of a lease agreement is to clearly describe the terms of the rental relationship, spelling out the rights, responsibilities, privileges, and limitations that apply to both the landlord and the tenants.
A high-quality lease agreement sets the tone of the landlord-tenant relationship from the get-go, ensuring that all involved parties fully understand what they can -- and can’t -- expect from one another. Perhaps even more importantly, it provides guidance and recourse to the landlord and tenant alike in the event that things go sour in the rental relationship.
However, far too many landlords rely on informal leases, generic lease forms, or handshake agreements when renting out a property. The process of compiling and completing a comprehensive lease form may seem to some to be too time-consuming or too “official".
Unfortunately, these basic agreements aren’t much help when a crisis arises, as it inevitably will. Even the best intentions don’t hold up to the harsh scrutiny of a court of law. To truly protect your investment, you need a comprehensive lease agreement that covers all the bases.
There are a lot of options out there when it comes to selecting a lease agreement. Selecting the one that’s right for you and your business can prove to be a challenge. Here are some guidelines that will help you distinguish the good from the bad.
• Is it legal? Most of the generic lease agreement forms available on the market contain only the bare essentials. Paper forms, such as those that are purchased at an office supply chain, may not have been updated to reflect recent legal changes. Make sure the lease agreement you use is up-to-date and in full compliance with current contract law.
• Is it applicable in my state? At the state level, laws impacting the landlord-tenant relationship are constantly changing and evolving. Trying to keep up with emerging laws on your own can be overwhelming. If the lease agreement you select doesn’t reflect the latest legislation, you may be out of luck if you ever end up in court. Make sure your lease agreement incorporates the latest state laws and regulations.
• Is it comprehensive? Most generic lease forms cover the basics, but they don’t delve into the kind of details that will define the day-to-day relationship between you and your tenants. Who will cut the grass? Who will shovel snow? Who will check the smoke detectors? If the lease agreement you select doesn’t spell out these kinds of details, you can expect the problems to quickly start piling up.
• Is it informative? Your tenants may not know how best to respond to situations like house fires, burst pipes, or gas leaks. A high-quality lease agreement package will double as a teaching tool, providing simple guidelines outlining the proper response in number of common household crisis situations; a generic lease form can’t and won’t.
• Is it professional? The lease package you hand to your new tenants says a lot about who you are and what kind of behavior you expect. If your lease agreement is a slapdash, paragraph-long contract you hastily scrawled on the back of a “For Rent” flyer, what does that say about the kind of relationship you expect to have with your tenant? On the other hand, if you hand your new tenants a comprehensive, custom lease agreement package complete with a cover sheet and table of contents, you’re establishing a tone of professionalism, respect, and decorum that will set the stage for the entire relationship.
Now that you’re armed with these guidelines, selecting the right lease should be simple. Remember, just as you would never skimp on the cost of a foundation for a new home, don’t put your property and livelihood at risk by building a rental relationship on a substandard lease. That’s one mistake landlords and property managers simply can’t afford to make.