How confident do you feel in your rental lease agreement? As a landlord, your lease is the foundation of the relationship between you and your tenant. Not only does the contract protect you, your investment property, and your tenant, but it can help you stay compliant with state and federal regulations.
Consider this: Are you repurposing an old lease or using a friend’s? Or are you not using a lease at all? If this is you, you could be subject to hefty fines, a court date, or the inability to remove a tenant from your property.
Although it can feel overwhelming, creating a compliant lease agreement doesn’t have to be complicated or expensive – if you’re using the right tools and resources.
In this guide, we’ll walk you through the key components of a lease agreement, common mistakes to avoid, and best practices for creating and signing your online lease agreement.
Pro Tip: Have a lease agreement and want to check compliance? Put your lease to the test with this free AI lease audit. Once uploaded, you’ll receive a red-lined version with recommendations on improving the agreement.
CTA Button if possible: Get a free lease audit
What is a Rental Lease Agreement?
A rental lease agreement is a contract between a landlord and the tenant(s) living in their rental property. It serves as the source of truth for the rights and responsibilities of both the landlord and the tenant.
These contracts also outline the details of what happens if the agreement is broken or when the term is approaching the termination date. Each state and county provides requirements for specific disclosures, verbiage, and clauses that must be included in your lease agreement.
5 Essential Elements of a Rental Lease Agreement
While there are many components you need to include in a rental lease agreement, here are the five most important considerations.
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Basic Information
The first information you need to provide in your lease agreement is your name (the landlord) and the tenant’s name. You’ll also need to include the full property address. Make sure to also include a title for the document. We recommend “Residential Lease Agreement”.
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Lease Term & Renewal
Next, you’ll need to define the lease term. This means the length of the agreement. For example, one year or 30 days. Be as specific as possible so there’s no misunderstanding.
Define renewal details as well. Clearly state what steps a tenant needs to take to let you know if they’re renewing or not and how many days they have to give notice.
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Rent & Security Deposit
Include the exact rent amount, the date it’s due, and payment methods. If you charge late fees, make sure you’re in compliance with your state’s late fee regulations and outline the late fee structure.
Before setting your security deposit, check your local regulations to see how much you can legally charge. After you’ve determined the amount due, include the amount due, the due date, and the payment method for the security deposit.
Make sure to include information about how you’ll return the security deposit and the timeframe for its return. Check local laws to ensure you comply.
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Property Rules & Responsibilities
Rules and responsibilities outline what a tenant can and cannot do on your property, like smoking on-site. This is the best place to include quiet hours, trash disposal details, property upkeep, subletting rules, and other expectations.
Depending on the state your rental is in, you can also require tenants to carry renter’s insurance. Be sure to include this as part of your rules and responsibilities clause.
New to owning rentals and not sure what to include as part of your community rules and responsibilities? Check out this article for helpful tips.
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Legal Protections & Eviction Policies
Landlord-tenant laws vary by state, meaning you’ll need to make sure your lease is compliant with your state’s regulations.
Each state has disclosures you need to include in your lease. Some examples include security deposit terms, property hazards (like lead paint and radon), and the landlord’s right to entry. You can read more on your state’s required lease disclosures here.
Additionally, your eviction and termination policies need to be clearly outlined and in line with your local jurisdiction. Protect yourself and your property by stating exactly what constitutes a lease violation or eviction. Examples include non-payment of rent or lease violations. In most states, landlords must follow a formal eviction process, starting with a written notice to cure or quit. If the tenant fails to comply, landlords may proceed with an official eviction filing in court.
Avoid Common Mistakes
Landlord and tenant laws are constantly changing. With the many different regulations upheld by local jurisdictions, you need to feel confident that your lease is state-specific and regularly updated to reflect legislative updates.
Some of the most common mistakes to avoid:
- Not Updating Your Lease
- As mentioned above, laws change quickly. One of the biggest mistakes you can make is using an old lease agreement without refreshing it to reflect new regulations.
- Vague Language
- Never leave room for misinterpretation in your lease agreement. All clauses should be clear and explicitly stated to avoid confusion.
- Skipping a pet policy
- 59% of renters own pets. Make sure you outline your rules and expectations for pets so you don’t have to deal with unauthorized animals or damage that isn’t covered by a security deposit.
- Not including essential clauses
- Double and triple check your lease to make sure you don’t leave out necessary information like rent amount, due dates, late fees, and security deposit rules. Anything left out of your lease is enforceable or will lead to legal trouble.
- Omitting subletting and guest policies
- Avoid allowing unauthorized occupants in your rental by clearly stating your subletting and guest policies.
- Improper handling of security deposits
- Each state has specific guidelines for collecting, storing, and returning security deposits. Make sure to account for your state’s requirements in your lease agreement.
- Failing to address maintenance responsibilities
- Outline the protocol for addressing maintenance issues and who is responsible for specific repairs and costs to avoid complaints or constant back and forth with your tenants.
Of course, you always have the option to consult a real estate attorney to help you draft a lease. However, attorney-drafted lease agreements can cost you big, some charging up to $400 an hour.
On top of that, laws are constantly changing. Consulting your attorney during each legislative update can get pricey, especially if you have more than one property. Luckily, there are other ways to create a trustworthy lease agreement.
How to Create & Sign a Rental Lease Agreement
As mentioned, you can consult an attorney to draft a lease agreement for your rental properties. However, compliant state-specific lease agreements that don’t chop into your bottom line are available with landlord software. A great landlord software offers attorney-drafted, state-specific lease agreements that cost less than your Netflix subscription.
We recommend TurboTenant for online rental lease agreements. TurboTenant offers unlimited lease agreements for just $149/yr, in addition to other landlord tools like rent collection, marketing, tenant screening, and more. An e-signature is included so you can easily send it off to tenants. TurboTenant also allows you to create addendums anytime should you need to update the agreement.
Pro Tip: Landlords should always sign lease agreements last. If you’re using landlord software, the platform will prompt you once it’s your turn to e-sign.
It’s a best practice to store your lease agreements securely online so you can easily find them. The last thing you want is to waste your time searching for a lost lease agreement when faced with conflicts.
Conclusion
A solid lease agreement is the best way to run a professional, secure rental business. Without a lease agreement, you essentially allow someone to live in your property with no guidelines, rent expectations, regulations, or move-out date.
There’s a slew of options for creating and signing a rental lease agreement, but remember, you don’t have to spend thousands on an attorney for a compliant lease agreement. Landlord software is a great modern solution to this essential task.
For more information on managing your rental property, from advertising your listing to collecting rent, check out TurboTenant’s rental management software. ADPI partners with TurboTenant to offer you an easy and affordable solution to self-managing rental properties.
