
As a property owner, the best way to protect yourself and your properties is to give your tenants a solid lease agreement.
Without a lease agreement, you risk introducing confusion and disagreements with your renters. This document is important as it clearly states each parties' roles and responsibilities.
Here are the most important elements to include in a lease agreement.
1. The Lease Terms
This is the basic framework of the lease. It indicates the timeframe in which the contract is legally enforceable. Usually, leases are considered either long-term or short-term. Whatever it may be, the duration of the lease must be stated explicitly.
2. Conditions for Early Termination
Sometimes, a tenant may terminate the lease early. It is important that you consider what will happen in this type of situation.
Consider the following questions:
- Who will bear the burden of the unexpected costs that arise?
- Will you allow the tenant to sublet the property to someone else?
- Will the tenant continue to pay the rent until you find another renter?
3. Rent Rates
The rent rate is the amount of money a tenant pays each month. This should be clearly stated in the leasing agreement. Also, if you choose to offer a your tenant a temporary discount, it should be discussed in the lease as well to avoid any ambiguity.
4. Due Date for Rent
There are 2 options for rent due dates:
- You can make the due date one month after the tenant moves-in
- You can make it due on the first of every month
So, for instance, if a tenant moves in on February 10, the due date for rent would be on March 10. Then, it would be on April 10, and so on for subsequent months. This would be the case if you choose option 1.
On the other hand, if you choose option 2, the due date would be on the first of every month, regardless of the date the tenant moves-in.
Also, in the lease, you should include the acceptable methods of payment. Here are some common options to consider:
- Cash
- Cheque
- Interact e-transfer
- Credit card or debit
- Post-dated cheques
- Pre-authorized bank withdrawals
5. Penalties for Late Fees
Sometimes, tenants may pay their rent late. As a property owner, this can be stressful. In order to prevent this, you should include late payment fees in the lease. The fee should be reasonable in cost. You don't want to charge too much, but you also don't want to charge too little. You can charge the tenant for every late day, or you can charge a percentage of the rent. Whatever you choose, make sure it is clearly indicated in the lease.
6. Details on Security Deposits & Fees
Here are some questions to consider when determining the conditions for the security deposit:
- How much is the security deposit?
- What can the money be used for?
- What costs may not be covered by the security deposit?
- What conditions must the tenant meet in order to get his deposit back?
7. Property Utilities
Rental property utilities can include water, gas, garbage and sewer. Clearly state which utilities you are responsible for, and which the tenant is responsible for.
Here are some things to think about concerning utility:
- Will the tenant be charged a fixed, or a variable sum for utilities?
- Does the rent cover utilities?
8. Penalties for Insufficient Funds
A tenant's rent payment may not go through due to insufficient funds. You must consider who will pay the bank if this situation were to occur.
9. Policies for Repairs and Maintenance
Consider the following:
- What repairs will you be responsible for?
- What repairs will the tenant be responsible for?
- How and when should a repair requests be raised?
- How will you intend to handle repairs?
- Will maintenance and cleaning happen regularly? Will it be scheduled?
10. Pet Policy
There are pros and cons for accepting pets in your property. You must state all your conditions in the lease.
- Are renters allowed to have pets?
- How much additional deposit will be charged to protect against pet damages?
If pets are allowed, their names and photographs should also be included in the lease agreement.
11.Smoking Policy
If a tenant smokes in your property, this can cost you. After the tenant moves out, the smell of nicotine can still linger on walls, furniture and drapes. Also, this smell can disturb other tenants. In the lease agreement, you must state your policy for smoking inside the property.
12.Other Policies
Here are other important details to include in the lease agreement:
- Statement about your right to enter the property
- Tenant's responsibility for yard maintenance and the penalty for neglecting it
- The status of all smoke detectors in the unit
- A bedbug policy
- Requirements for renter's insurance or pet insurance
- Disclosure about the presence of lead-based paints in a property
Bottom Line
By including all these elements in the lease agreement, you can be sure that you are doing everything possible to protect yourself. However, remember that this is only a checklist of what should be covered. Speak to a professional for more information and for tips on how to produce a well-written lease.