When investing in buy-and-hold properties, owners must apply the best resources to ensure excellent returns on these investments. As a landlord, it's crucial to have a residential lease agreement in place with your tenants. This document outlines the basic rights and responsibilities of both parties and helps avoid any potential misunderstandings down the road.
While most landlords are familiar with the basics of a lease agreement, some clauses are often overlooked but can be critical in protecting your real estate investments and income. Here are six clauses to consider adding to your lease!
1. Subletting Rules (or No Subleasing Allowed)
This clause allows you to prohibit tenants from subletting the property to someone else. This is important because it ensures that you always know who is living in your residential property and that they are responsible for following the terms of the lease.
If you plan to allow a renter to sublet the rental unit under the right circumstances, make sure the rental agreement outlines the procedure for them to follow and the rules involved with this arrangement.
2. An Early Termination Clause
While a rental lease agreement is binding and holds both the tenant and property owner to a fixed term of occupancy, sometimes renters need to break the lease for valid reasons.
This clause allows you to set the conditions under which a tenant can terminate a lease agreement before the end of the term. This is important if you want to avoid any unexpected early terminations and ensure that you're not losing money on an empty property.
Use this clause to tell renters their responsibilities when leaving a property early, including being up-to-date on monthly rent payments, leaving the property in good condition, and delivering written notice about ending the lease.
In addition to allowed circumstances when ending a lease early, this section should also include the penalties for tenants who break the lease early without following the proper process or without a valid reason.
3. The Cleaning & Lawncare Clause
This clause outlines who is responsible for keeping the property clean and well-maintained—specifically for the exterior of the property. This can help prevent any disputes between a landlord and tenant over who is responsible for specific tasks or the expectations you have for the exterior appearance of the rental unit.
In the rental contract, make sure to include penalties your renter can incur if they fail to follow the expectations in this clause. Including this section in your rental agreement helps prevent issues like cars parked on lawns, junk piling up in the backyard, or potential safety hazards or rodent problems from unkempt lawns and landscaping.
4. Painting Rules
Whether you allow your renters the freedom to paint walls in the rental home or not, a basic lease agreement needs text to document the rules. It's important to have this in place so that there aren't any surprises later on when you discover a wall painted a different color than when your tenants moved in.
If you're comfortable allowing renters to paint the interior to their style preferences, make sure your lease agreements have a process in place for them to request it, get your approval on paint colors, then return the walls to their original color before moving out.
However, if you prefer to determine when and how painting occurs at the property, make that clear in the agreement. You can also charge painting fees to tenants in some situations, so be sure to document that as well.
5. Noise (Quiet Hours)
Rental homes are often located in residential neighborhoods with other families nearby. If you invest in multi-family residential properties, your rental property tenants share walls and common areas with other residents.
To be good neighbors and avoid any potential disputes or noise complaints, it's essential to set expectations for noise levels at the property. Whether you offer a month-to-month lease agreement or fixed-term leases, this clause can outline specific quiet hours when loud noises must cease, like between 10 pm and 7 am on weeknights. You can also require that all music and TV volumes remain at a reasonable level during those times. If you have any other specific rules related to noise, make sure they're included here as well.
6. A Force Majeure Clause
A force majeure clause is included in many contracts and leases as a way to protect both parties from unforeseen circumstances that prevent them from fulfilling their obligations under the agreement.
For example, if a natural disaster damages the property and makes it uninhabitable, this clause can be invoked to terminate the standard lease agreement and release both the landlord and tenant from their obligations.
Protect Real Estate Investments With an Airtight Rental Agreement!
You work hard to find excellent properties that will generate the revenue you need as buy-and-hold rental properties. Make sure you protect those investments with the right clauses in your residential lease agreement.
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Create strong rental agreements with the insights in our free ebook, “The Ultimate Guide to Lease Agreements!”
