The Landlord’s Guide to Lease Agreements & Rental Agreements
Lease Agreement vs. Rental Agreement: What’s in a Name?
In many parts of the U.S., the two terms are used interchangeably.
In other regions, a lease agreement refers to a longer-term contract with a definitive beginning date and ending date. These are also called fixed-term leases.
For instance, a lease that has a beginning date of September 1, 2018 and an ending date of August 31, 2019 is an example of a lease agreement. Even though (as state law permits), a lease agreement may automatically continue month-to-month at the end of the lease term; it will still be considered a lease agreement.
A rental agreement on the other hand, lists no definitive ending date. It continues until either the landlord or the tenant sends the other notice. The notice would be sent in the way that is either prescribed in the written rental agreement or as per the state landlord tenant statutes.
While rental agreements can technically be a verbal agreement, the landlord leaves themselves open to dozens of risks without the protection of a written rental agreement or lease contract.
“State-Shmate” – Do I Really Need A State-Specific Lease Contract or Rental Agreement?
Back in the ages before computers, landlords would either go to a stationary store and grab a rental agreement template (the ones with carbon paper between the pages), or spend a mountain of money having a local attorney draft one up.
Rarely did a landlord run head-on with professional tenant.
Nowadays, legal loopholes and tricks are a search away on Google (which in 2006 became an official verb in the Oxford English Dictionary). So, a bit of googling and we have now have some very savvy tenants.
Today it’s more important than ever before that landlords protect themselves legally and stay one step ahead. Not only do most states have their own legal requirements, clauses, disclosures, or addenda that landlords must include in their lease agreement, but your lease should also be used as a shield to protect against lawsuits and disputes.
Are There Many Differences Between State-Specific Lease Agreements?
There are differences. Period. And if you own rental properties in more than one state, you’ve seen these legal differences in action.
For example, there are no late fee restrictions in Kentucky landlord tenant statutes
. Move over to New Jersey landlord laws, where there are also no explicit late fee limits, yet there are other constraints. For instance, in New Jersey state landlord tenant statutes
, senior citizens must be provided five business days before any late fee may be charged. And what passes as “reasonable” late fees under New Jersey landlord-tenant laws is different than in Kentucky.
Meanwhile under Maine Landlord Tenant
rules, no late charge until after 15 whole days have passed by after the day the rent was due. Landlords may not charge more than 4% of the rent.
And these are just the state law differences for one single section of the lease agreement, regarding late fees.
Let’s talk about security deposits. Do you know the number one reason tenants sue their landlords? If you guessed, mishandling security deposits, you win the prize! Not only are there limitations on what you may accept as a security deposit but there are many rules, vastly different state to state, in how to handle them.
The mistake of failing to return a deposit on time after moving-out or mixing the security deposit money in with your personal banking account for just a few of the common (and costly) security deposit mistakes
made by landlords.
Using a generic lease or rental agreement template leaves you only unprotected if your tenant challenges you in court.
A comprehensive state-specific lease agreement contains:
- Required verbiage and clauses relevant to state requirements
- Specific responsibilities and expectations for all parties to remain state-compliant
- State required disclosures and addenda
- Keeps in line with any fee or security deposit restrictions and regulations mandated by the state
There are contracts for just about everything. As a matter of fact, just using the average website has you passively agreeing to a set of terms and conditions. We live in a litigious world where it has become ever more necessary to protect and defend.
A real estate investor has a property worth tens of or hundreds of thousands of dollars. Yet, they hand the keys over to a virtual stranger with a handshake and a nod.
Then you and your tenant disagree over, well, anything, and off to court you go.
Don’t want your tenants running an Airbnb business
in your rental property? Include the clause in your lease contract.
Prohibit pets or new roommates and boyfriends moving into your rental unit? Write it into your lease agreement.
Require the tenants to mow the lawn regularly, replace batteries in the smoke detectors, and replace the air filters every three months? It better be included in your rental agreement!
Unless it’s in writing, you’re just asking for a he-said/she-said dispute in court.
A protective lease or rental agreement will have many elements in place to provide a shield against a bad tenant, a court-hearing or even how easy a possible eviction may move along. One clause can be the difference of guarding you and your investment or leaving you wide open for a lawsuit.
Make sure your rental agreement includes protective lease clauses
that outline the tenant’s responsibilities and restrictions in detail. For example, what’s your guest policy? Without one, your tenant’s boyfriend first spends five nights/month there, then ten, then twenty, and eventually he’s there every night. “But the lease doesn’t say anything,”
responds the savvy tenant. Just a few words in a written lease agreement could have prevented the deadbeat stoner boyfriend from taking up residence in your rental unit.
Is There a Difference Between a House Rental Agreement and an Apartment Rental Agreement?
While most of the legal language will be the same in a house rental agreement and an apartment rental agreement, there are a few key differences.
Namely, what are the tenant’s obligations and responsibilities? In a single-family rental home, the tenants will likely be responsible for shoveling the sidewalk, raking leaves, mowing the lawn, changing the air filters, etc.
In an apartment, these grounds-keeping and maintenance responsibilities probably fall to the landlord or property manager.
Similarly, how are utilities handled? Renters in most single-family homes pay for their own utilities, while apartment dwellers often have their utilities included in their rent.
This underscores why you need a flexible lease contract. Our lease agreement packages allow for multiple clause options, that the landlord can select to include or exclude depending on whether they’re creating a house rental agreement or apartment rental agreement.
Why Landlords Should Start with a Flexible Template Before Converting to Lease PDF
Should my lease or rental agreement be in Word, an editable online document builder, or a lease PDF?
The problem with a fill-in lease PDF template is that it’s just not very flexible.
Every lease will have some similar legal verbiage and clauses. But as pointed out above, there will be different lease clauses needed for a house rental agreement than an apartment rental agreement, and each property and tenancy is unique.
For example, a lease or rental agreement where you are living in one of the units will require separate and distinct clauses!
Using a flexible lease agreement in Word format or using an online document builder lets you quickly and easily adjust the document to your specific needs. You can easily convert it to a lease agreement PDF, for emailing and e-signing.
And once you’ve saved it as a lease agreement PDF, it’s then much harder for tenants to edit without your knowledge.
Shameless plug: our lease agreement packages are in Word, and completely editable and reusable.
Before Signing a Rental Agreement
Tenant screening is the single most important activity a landlord does.
No matter how strong and protective and compliant a lease agreement is, it cannot protect you from tenants who refuse to pay the rent and follow the rules.
Require every single one of your applicants complete an in-depth rental application. We offer an emailable, e-signable free rental application
, so no excuses!
The rental application is the first part of the tenant screening process. Be sure to fun a full tenant credit report, nationwide criminal background check, and nationwide eviction history report. We offer these tenant screening reports
, but even if you use a competitor, make sure you run these reports for every applicant.
Call employers and past landlords, and verify all information stated on the rental application.
Even after approving an applicant, keep their rental application and tenant screening reports on file. Why?
Imagine your tenant skips out, and you are trying to locate them. What’s their driver’s license number, and their license plate? Or if there is an emergency, and you need to contact your tenant’s next-of-kin. What’s their emergency contact information?
For that matter, if a declined applicant comes after you with a Fair Housing landlord lawsuit
, you need to be able to demonstrate that you chose a more qualified applicant.
Not all lease and rental agreements are treated alike. Make sure whichever you choose is going to protect you and your pretty darn expensive asset. Make sure that the lease or rental agreement you end up with is state-compliant and chock full of important lease clauses to draw clear and precise boundaries around the landlord tenant relationship.