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Is Your Residential Lease Ironclad?

By Brian Kline | August 7, 2018

If you've been a residential landlord for much time at all, you probably know your lease inside out. But often, it's not what's in the lease that later causes you headaches, it's what you didn't put in the lease that causes problems.

In almost every state, the tenant/landlord laws are strict. Before you start making changes to your standard lease, you probably want to review those laws. By the way, when was the last time you reviewed both the laws and your lease anyway? Law changes have probably been made that affect what is currently in your lease.

It's strongly recommended that you review your lease before another tenant signs on the bottom line.

Make Sure You Have a Severability Clause

A severability clause is one of the most over looked but important clauses to have in your lease. The severability clause says that should one or more clauses in the lease be found to be illegal or inapplicable, all of the other clauses remain in force. This is important because if you end up in litigation with a tenant, without a severability clause, if the judge finds one clause invalid, he or she can declare the entire lease invalid.

A clause that is sometimes to vaguely worded is the late fee clause. It might say something like "late fees apply after the date the rent is due". That is way too vague because it doesn't state what the late fee is or exactly what date it applies. You want something like "Rent is due on the 1st of each month. Beginning on the second day of the month, 3% of the monthly rent will be charged as a late fee for each day the rent is late." Even better when you change the percentage into a firm dollar amount. Again, check your state and local laws because there may be caps to how much you can charge for late fees and when they can be applied.

Be Clear About Utilities and Rules

Does any portion of your tenant's rent go towards paying utilities such as water or electricity? If so, what portion of the tenant's rent goes towards each one and in what order are they paid if the tenant only pays part of the rent? If your name is on the master utility accounts, you might want to stipulate those be paid first so that you keep your account in good standing. That means any unpaid rent is due to you rather than a utility company if the issue ends up in court.

Another clause you should have is the number of people that reside at the residence. The more people living there the more damage will be done, even if it's normal wear and tear. This brings up the need to define your policy about overnight guests. Do you allow them, how many at one time, and for how long? Without this clause, the number of people living there is difficult to enforce because they simply become long term guests.

These are some other subjects you may want to include in your lease:

  • What types of activities are allowed (or not allowed) regarding running a business, making car repairs, storing recreational vehicles, etc.?
  • What constitutes a breach of the lease that mandates the tenant must vacate?
  • How much notice must be given and under what circumstances must the tenant allow access to maintenance workers, exterminators, and other trades people? Again, check local laws.
  • Can the property be shown to prospective tenants after the current tenant has given notice they are vacating or do you have to wait until they move out?

Keep Leases Current

Property leasing may be one of the oldest professions but it does change with time. One change that very few leases deal with is the trend towards home-sharing on platforms like Airbnb, HomeAway, and VRBO. You’ll need to decide what your policy is. You might allow home-sharing as a value added clause for your tenants. You might even be able to collect a slightly higher rent since the tenant can also make a little money on the side. Or you may decide to specifically not allow this because you want to maintain control of who is living in your rentals.

If you have a history of a specific type of problem with tenants or clauses in your lease, you should include a new clause or reword the existing clause. You are highly recommended to periodically review both your lease and your state tenant/landlord laws to be sure everything remains up to date.

Please comment below on how you customize leases.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for seven years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years with articles listed on Yahoo Finance, Benzinga, and uRBN. Brian is a regular contributor at Realty Biz News
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