A rental agreement is one of the most important things to focus on when you are starting to rent out your property.

When you create a solid rental agreement, you are able to protect yourself, your property, and your tenants by communicating your expectations, requirements and rules upfront and leaving no room for misinterpretation or confusion from either party. 

A detailed lease agreement can help you navigate potential disputes you may end up having with your tenants, in addition to helping you clear up any misunderstandings or questions that your tenants may have about the property. 

The Process of Leasing Your Property

Generally, you will be able to start writing up your lease agreement after you have gone through the following steps to find a reliable, quality tenant to occupy your rental home:

  1. Marketing: As a landlord, you want to start by creating an ad for your rental home to attract a wide pool of prospective tenants. Make sure to include high-quality photos, an accurate description of the rental property, and any qualifying factors that you are looking for in a future tenant. 
  2. Open Houses or Private Showings of the Property: During the marketing process, you should allow prospective tenants to see the home in person to determine if it is a good fit.
  3. Reviewing Applications from Tenants: A tenant’s application can provide you with the necessary information that you will need to determine whether or not they will be the right fit for your rental property. 
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  1. Tenant Screening: Make sure to screen all prospective tenants prior to choosing someone to occupy your rental property. This includes running a credit check, a criminal background check, looking into their rental history, and verifying their income and employment.
  2. Contacting the References Listed on a Tenant’s Application: Be sure to reach out to any former landlords to gain more insight regarding how a tenant took care of previous rental properties.

Landlord Tenant Laws in Different States

In the United States, each state has its own set of landlord-tenant laws that all parties must follow. This can be confusing, so it’s important to familiarize yourself with your local landlord-tenant laws to ensure that you are always following regulations and staying out of legal trouble. 

These laws detail your rights and responsibilities as a landlord along with your tenants’ rights and responsibilities. The best way to understand the landlord-tenant laws of your state is to contact a local licensed attorney to thoroughly explain the rules and regulations that you must follow. 

Different Types of Lease Agreements

There are two main types of lease agreements when it comes to renting out your property, and the one you use should be determined by your specific situation. These types of leases include:

  1. Fixed Term: This kind of lease includes a set end date, typically lasting between six months and one year. 
  2. Month-to-Month: This kind of lease will automatically renew each month until the landlord or tenant decides to end the tenancy. 
Two people carrying moving boxes into a house with a For Rent sign outside of it

Mandatory Disclosures

Many states have a list of required disclosures that landlords must provide their tenants with prior to the lease being signed. These are some common disclosures across the country:

  • Lead paint concentrations on the property. This is usually necessary if the property was built prior to a specific year (usually 1978).
  • Any mold that may be present on the property.
  • If the property has been connected to illegal activity in the past.

Security Deposits

As a landlord, collecting a security deposit can help protect you and your property from damages that may be caused by an irresponsible tenant. If you choose to require a security deposit from your tenants, then the amount must be included in the lease. 

Keep in mind that many states have laws regarding how much you may collect for a security deposit, and which circumstances allow a landlord to withhold the funds. There are also many regulations regarding the process of returning the deposit to the tenant after the lease has ended.

Last Month’s Rent

When you collect a security deposit from a tenant, you may also decide to collect the last month’s rent from them. In some states, like Oregon, you can treat these funds like an additional security deposit, meaning that you must hold the money in a separate account and give the tenant any interest that has been generated over the tenancy. 

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How to Create a Lease Agreement

But how do you create a solid lease agreement that can properly protect both you and your tenant? We’ve put provided you with 13 steps to help you make sure that any lease agreement you write up is a detailed and solid legal document that leaves no room for confusion. 

1. Collect Information from Every Party Involved

The first step to creating any legal document is making sure that it includes the essential information of all parties involved. This is especially true for a lease agreement. You can use a lease template if you find them helpful. 

As a landlord, you will want to start by filling out your name, phone number, email address, and mailing address, as this will allow you to receive important updates regarding your lease agreement. 

This information should also be gathered for all tenants who sign the lease agreement, any co-owners of the rental property, and any property managers that will have access to the rental home. 

If there are any additional occupants of the home that are not listed on the lease (ex. Children or elderly relatives), they should also be documented to make sure that you have a detailed record of anyone living in your rental property. Keep in mind that there are some states that have maximum occupancy regulations that must be met. 

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2. Include Important Specifics Regarding Your Rental Property

After you have gathered all the information about anyone who will be living in or involved with the rental property, it’s time to include details about the property itself! There are two main types of residential rental properties:

  • Single-family homes: A standard house or townhome.
  • Multi-family homes: This can include a wide variety of properties, such as apartments, condos, duplexes, multiplexes, and basement apartments.

Regardless of the type of rental property you own, you will want to gather the following information to include in your lease agreement:

  • The address of the home.
  • Whether or not the rental property is part of a homeowners or condo association.
  • Any defects or disclosures regarding the property.
  • Any appliances, furniture, or fixtures that are included with the rental property.

3. Take the Property’s Utilities and Services into Consideration

When you write up your lease agreement, you must consider the utilities and services provided to the tenant and what they will cost. 

Will the tenant have to pay for these on top of rent? Will you include the cost of utilities in the monthly rent? Or will you decide to cover some of the cost yourself? 

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Whatever you decide as the landlord, the details must be included in the lease agreement. Here are some examples of utilities and extra services to consider:

  • Electricity.
  • Gas.
  • Heat and heating oil.
  • Water and waste services.
  • Garbage removal.
  • Removal of snow.
  • Landscaping of the property.
  • Cable, phone, and internet access.

Whether you decide to cover the cost of these services yourself or have the tenant pay for them, you must clearly indicate these responsibilities in the lease agreement. If the tenant is paying for some or all of these things, then you must clarify in the agreement which ones they will be covering and when their payments will be due.

4. Familiarize Yourself with the Terms of Your Lease

The terms of your lease will outline the length of the agreement and what kind of agreement it will be. It will also detail the consequences that the tenant will face should they decide to break the lease early, and the specific set of circumstances in which your tenant may leave the rental property before the lease is over. 

These are two terms that you should include in the details of your lease agreement:

Termination: Ensure that when you are writing a lease, you clearly outline how long the agreement will last and what the conditions are. Is the lease month-to-month or does it have a set end date? When the end date approaches, will the tenant have the option to renew the lease? These are essential to include in every rental agreement. 

Three people standing in front of a house, two of them are shaking hands

Eviction: In your rental agreement, you must include clear rules and policies when it comes to eviction. Which actions violate the lease agreement? If you should ever find yourself in a situation where you must evict a tenant, make sure that you are following your state’s eviction laws to avoid legal trouble or fees.

5. Clearly Communicate the Terms of Rent Payments

First, you want to determine what your base rent will be. Your base rent is the cost of rent before any of the other charges related to the rental property are applied. Ultimately, you will want to base the monthly cost of rent that you are charging your tenant on similar properties in the area. 

The goal when deciding your rent price should be to stay competitive in the market while still making a profit. Additionally, ensure that you are always complying with any local rent control laws that may be in effect in your state.

In your lease agreement, specifically state how much you are charging for rent, and when the rent will be due. 

6. Calculate Additional Fees

When communicating expectations to your tenants, be sure to include any extra fees that may be applicable to the rental property. This can include the following:

  • Pet fees or pet rent.
  • Fees for late rent payments.
  • Insufficient funds fees.
  • Utilities and services.
  • Resident benefits package, if you choose to provide one.
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7. Choose a Preferred Payment Method with Your Tenants

As the landlord, you have the ability to choose which payment method your tenants can use to pay their rent and added fees every month. All you have to do is make sure that you have clearly stated which method you prefer in the lease agreement. 

Common payment methods among landlords and tenants include electronic payments, checks, and money orders. It is always a good idea to offer your tenants the most convenient choice when it comes to paying their rent to ensure that you get your payments on time every month.

8. Take Your Rights and Obligations into Consideration

As a landlord, you have certain rights and responsibilities defined by landlord-tenant law that must always be followed. Your tenants have their own rights and responsibilities as well. When you write up your lease agreement, it is always a good idea to outline these regulations clearly. 

What are your tenant’s obligations when it comes to your rental property? While these may legally vary from state to state, there are some general rules that apply across the country. Your tenant must ultimately comply with all the conditions of your lease agreement. This may include the following:

  • Always using the property for its intended purpose only.
  • Ensuring that only allowed parties are occupying the home.
  • Refraining from disturbing other tenants or neighbors.
  • Adhering to all the rules outlined in the lease agreement.
  • Paying utilities in a timely manner.
  • Maintaining a clean and safe living environment on the property.
  • Notifying the landlord immediately should any repairs be necessary.
One person reaching across a desk to hand a pen to another person

Likewise, landlords have their own set of obligations that they must adhere to. They include the following:

  • Providing tenants with services and utilities that are listed in the lease or required by law.
  • Maintaining a habitable environment on the property.
  • Making necessary repairs in a timely manner.
  • Respecting the privacy of tenants and not entering the property without a tenant’s permission.
  • Not disturbing or interfering with the tenant’s enjoyment of the home.

9. Require Tenant Insurance

Landlords also have the option to require that tenants purchase renter’s insurance prior to moving in or signing the lease agreement. If you decide to request this, some states may legally require you to get comparable liability insurance. 

If insurance is something that you decide to pursue, it is a good idea to speak with an insurance broker to determine how much coverage is needed and include the minimum coverage cost in your rental agreement.

10. Decide Which Rules You Will Enforce for Your Tenants

As a landlord, you may set your own rules to ensure that your rental home is well-maintained and your tenants can enjoy the property to the fullest. But which rules can you include in a lease?

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Here are some examples:

  • Homeowners or condo association regulations: There may be rules already included with your specific area or neighborhood.
  • Written consent regulations: As the landlord, you can decide whether you will allow modifications to the rental, such as changing the locks or painting the walls, without requiring your approval.
  • Safety rules: These rules can include weight restrictions on balconies and decks, prohibiting materials that are flammable, and other rules regarding your tenants’ well-being and safety.
  • Maintenance rules: In the lease agreement, you should specify who will be responsible for certain property maintenance tasks such as taking out the garbage, mowing the lawn, raking, or shoveling sidewalks in the wintertime. The more detailed the better!
  • Rules regarding the keys to the property: Make the tenant aware of what happens if a key to the property is lost or what actions are required of them should they move out. Will they need to return the keys to the property or will you change locks in between tenants? 

11. Establish Your Policies Clearly

Make sure that when you write up your lease agreement, all of your policies are clearly stated. This can include the following rules:

  • Smoking: Are tenants allowed to smoke? If so, where?
  • Pets: Are pets allowed? Will you be screening tenants’ pets? If so, are there regulations on the kind of pet or the size? Is there a pet deposit or any extra fees involved?
  • Parking: Where can tenants park? Does it cost extra? Where are they not permitted to park?
  • Storage: Is there extra storage available for tenants? If so, where and at what cost?
Smiling person surrounded by piles of cardboard moving boxes

12. Review the Agreement

Before sending the agreement to your tenant, take one last review to ensure that nothing was missed. If possible, it is good to have a lawyer or a knowledgeable property manager look over the documents as well. Make adjustments accordingly!

13. Sign Your Lease Agreement!

Now that you have created a solid lease agreement, it’s time for you and your tenants to sign it! After your tenant has reviewed the document and confirmed that they understand all the conditions of the lease, you both will need to sign the lease to begin the tenancy. 

Bottom Line

Now that you know how to create a solid lease agreement that can protect yourself and your tenants, you’re ready to start renting out your property! Again, always remember to check your state’s landlord-tenant laws before writing up a legal rental agreement. To make keeping track of all of this easier, consider using a property management CRM!