Chapter 2 Preparing Leases and Rental Agreements

• Library: Every Landlord's Legal Guide (Nolo) (2020 Ed.)

CHAPTER 2 Preparing Leases and Rental Agreements

Which Is Better, a Lease or a Rental Agreement?

Month-to-Month Rental Agreements

Fixed-Term Leases

Clause-by-Clause Instructions for Completing the Lease or Rental Agreement Form

Clause 1. Identification of Landlord and Tenant

Clause 2. Identification of Premises

Clause 3. Limits on Use and Occupancy

Clause 4. Term of the Tenancy (Lease)

Clause 4. Term of the Tenancy (Rental Agreement)

Clause 5. Payment of Rent

Clause 6. Late Charges

Clause 7. Returned Check and Other Bank Charges

Clause 8. Security Deposit

Clause 9. Utilities

Clause 10. Prohibition of Assignment and Subletting

Clause 11. Tenant's Maintenance Responsibilities

Clause 12. Repairs and Alterations by Tenant

Clause 13. Prohibition Against Violating Laws and Causing Disturbances

Clause 14. Damage to the Premises

Clause 15. Renters' Insurance

Clause 16: Pets

Clause 17. Landlord's Right to Access

Clause 18. Extended Absences by Tenant

Clause 19. Possession of the Premises

Clause 20. Tenant Rules and Regulations

Clause 21. Payment of Court Costs and Attorneys' Fees in a Lawsuit

Clause 22. Disclosures

Clause 23. Authority to Receive Legal Papers

Clause 24. Additional Provisions

Clause 25. Validity of Each Part

Clause 26. Grounds for Termination of Tenancy

Clause 27. Entire Agreement

Signing the Lease or Rental Agreement

About Cosigners

FORMS IN THIS CHAPTER

Chapter 2 includes instructions for and samples of the following forms:

• Month-to-Month Residential Rental Agreement
• Month-to-Month Residential Rental Agreement (Spanish Version) (companion page only)
• Fixed-Term Residential Lease (companion page only)
• Fixed-Term Residential Lease (Spanish Version) (companion page only)
• Cosigner Agreement

The Nolo website includes downloadable copies of these forms. See Appendix B for the link to the forms in this book.

Interactive Online Lease Forms

The rental forms described here, which you can download from the book's companion page on the Nolo website, are good in all 50 states. To tailor them to your state's laws, use the charts included in this book's appendix.

If you prefer an interactive lease or rental agreement form, you can purchase one at Nolo.com. A 50-state form, as well as state-specific forms for many states, are available. And there's a special discount for purchasers of this book: Just use coupon code ELLIBOB15.

The rental agreement or lease that you and your tenant sign forms the contractual basis of your relationship. Together with the laws of your state—and, in a few areas, local and federal laws—it sets out almost all the legal rules you and your tenant must follow.

Your rental agreement or lease is also a blueprint for the tenancy, full of crucial and practical details, such as how long the tenant can occupy your property and the amount of the rent.

Because your lease or rental agreement governs so much of your relationship with your tenant, it's important to get it right. This chapter shows you how to prepare clear, fair, and effective leases and rental agreements, and provides thorough explanations of each clause.

Why use our lease or rental agreement, when you probably already use a printed form that seems adequate? There are several reasons:

• Our agreements are based on careful research of every state's landlord-tenant laws. Many preprinted forms ignore state-by-state differences. In particular, free or low-cost online forms are riddled with errors, typically written by attorneys who practice in one state and aren't aware of other states' laws. This doesn't stop websites that offer landlord forms from advertising state-specific leases. We don't use the illegal or unenforceable clauses that pepper many preprinted agreements. Some forms still include clauses that courts threw out years ago or are so one-sided as to be unenforceable.
• Our agreements are written in plain English and easy for you and your tenants to understand. We believe strongly that it's to everyone's advantage to have a written agreement that clearly informs tenants of their responsibilities and rights.
• Our lease and rental agreements are available for download on the Nolo website (see Appendix B for the link to the forms in this book). You can easily tailor them to fit your own situation. Throughout the chapter,
we suggest modifications to reflect your particular circumstances. We also caution you about common clauses that get landlords into legal hot water.

RESOURCE

Tailor our lease forms to your state. The rental documents described in this chapter and included on the book's companion page on the Nolo website are good in all 50 states. You simply need to tailor the document to your state using the charts included in this book.

CAUTION

Don't use our forms if the rent is subsidized by the government. You might need to use a special government lease if you rent subsidized housing, such as Section 8.

Which Is Better, a Lease or a Rental Agreement?

Although leases and rental agreements are both contracts that establish tenancies, they are legally (and practically) very different. As a landlord, you'll need to understand how leases and rental agreements differ before you choose to use one instead of the other.

Month-to-Month Rental Agreements

A written rental agreement creates a short-term tenancy. Rental agreements typically establish month-to-month tenancies, although many laws refer to them as "periodic" tenancy agreements, and allow them to govern tenancies for other time periods (for example, biweekly rentals).

A month-to-month tenancy automatically self-renews each month. To end a month-to-month tenancy, either you or your tenant gives the other the proper amount of written notice under state law (usually 30 days).

You can change the sample month-to-month rental agreement provided with this book to reflect a rental period of your choosing.

Month-to-month rental agreements give landlords more flexibility than leases. Under a rental agreement, you can increase the rent or change other terms of the tenancy on relatively short notice (subject to any local rent control restrictions). You may also end the tenancy at any time (again, subject to any rent control restrictions), as long as you give the required amount of notice. Not surprisingly, many landlords prefer to rent on a month-to-month basis, particularly in tight rental markets with plenty of tenants and rising rents.

On the flip side, month-to-month tenancies often result in more tenant turnover. Tenants who make a short-term commitment are more likely to move than those who have signed a long-term lease. If your rental business strategy is based on having high-quality, long-term renters (or if you live in an area where it's difficult to fill vacancies) you'll probably want tenants to commit for a longer period. But, as discussed below, although a fixed-term lease might encourage tenants to stay longer, it doesn't guarantee you won't have turnover.

Fixed-Term Leases

A lease binds both you and the tenant to all of its terms for a fixed period of time—usually a year. While the lease is in place, you can't raise the rent or change other terms of the tenancy, unless the lease specifically allows you to make changes or the tenant agrees to your proposed changes in writing.

In addition, you usually can't terminate a tenancy or prevail in an eviction lawsuit before the lease term expires, unless the tenant fails to pay the rent or significantly violates the lease. Being locked in by a lease can be problematic if you have a tenant you would like to be rid of but don't have sufficient cause to evict.

For example, if you wish to sell the property halfway into the lease, the existence of long-term tenants—especially if they pay less than the market rate—can deter some potential buyers. The new owner usually purchases all the obligations of the previous owner, including those created by existing leases. Of course, the opposite can also be true—a property with quality, long-term tenants who pay market rent might be attractive to potential new owners who want to use the property as an investment, not a home for themselves.

At the end of the lease term, you have several options. You can:

• decline to renew the lease (this might not be an option in areas with rent control)
• sign a new lease for a set period, or
• do nothing (under most states' laws, if you continue to collect monthly rent, you've created a month-to-month tenancy).

Chapter 14 discusses in detail how fixed-term leases end.

Although leases restrict your flexibility, having long-term tenants can be beneficial. Some tenants make a serious personal commitment when they enter into a long-term lease, in part because they think they'll be liable for several months' rent if they leave early. And people who plan to be with you over the long term are often more likely to respect your property and the rights of other tenants, making your job easier and more enjoyable.

CAUTION

A lease guarantees less income security than you think. As experienced landlords know well, it's usually not hard for a determined tenant to break a lease and avoid paying rent for the unused portion of the lease term. A few states allow tenants to break a lease without penalty when certain circumstances arise, such as needing to move to a nursing home. In addition, tenants who enter military service or who receive activation orders are entitled to break a lease. And many states require landlords to "mitigate" (minimize) the loss they suffer as a result of a broken lease—meaning that if a tenant moves out early, you must use reasonable efforts to find another suitable tenant at the same or a greater rent. If you rerent the unit immediately (or if a judge believes it could have been rerented with reasonable effort), the lease-breaking tenant is off the hook—except, perhaps, for rent for the days or weeks the unit was vacant plus (sometimes) any costs of rerenting it.

Landlords typically prefer leases in areas...