Landlords: Updating Your Lease Agreement for 2017

by Chris on December 19, 2016

If it’s been a while since you last updated your lease agreement, 2017 is a good time to do it.

A lease agreement is there, first and foremost, to protect a landlord. But, with an onslaught of new rental regulations and the sustained popularity of some new trends, your current lease may fall short.

Take some time to sit down with your lawyer and discuss any modifications needed to bring you — and your lease — up to date. Here are some topics you may want to cover:

Short-Term Sublets

Airbnb vacation rentals are booming, despite continuing controversy. Landlords remain caught in the middle. Some are on board with overnight sublets — so long as tenants share the profits. Other landlords are opposed to the practice. It’s likely the majority are unaware that their tenants are profiting by leasing out the rental property to strangers.

Landlords in major cities like New York don’t have the option of looking away. Restrictions are in place which hold landlords accountable if tenants sublet short-term.

Whether it’s the lack of tenant screening, poor supervision, or overcrowding, short-term vacation rentals can greatly increase a landlord’s costs and liabilities. This problem is not going away any time soon.

Prohibiting the practice may be the best strategy, and that should happen in the lease agreement. The rental home is for residential use, not business. Perhaps renting out a room on a routine basis should be identified as a business use, or the lease should contain consequences, like eviction, when tenants sublet for profit.

Marijuana

In 2016, several more states legalized marijuana use in some form or another. This is a problem for landlords because the federal government has yet to remove pot from its list of illegal drugs.

Additionally, marijuana use in multi-family properties triggers more tenant complaints, mostly over the smell. States that have legalization in place have witnessed an increase in apartment fires caused by tenants who distill marijuana into “wax” using butane.

Colorado was at the forefront of the marijuana legalization movement. There, a landlord has the right to restrict marijuana use, including growing plants, in rental properties. These restrictions should appear in the lease agreement. In some cases, landlords merely need to include marijuana in an existing no-smoking addendum.

Tenants may be under the impression that marijuana legalization gives them a free rein to smoke at home. In reality, when voters pass legalization statutes, state governments then need to regulate the practice. Many of these regulations have yet to be drafted, so watch for changes in the law.

Crime

There are a number of ways that crime prevention efforts now affect rental property management.

HUD recently has taken the position that a landlord’s blanket prohibition on criminal history during tenant screening is discriminatory. Likewise, HUD says that rejecting or evicting a tenant because of an arrest may violate the Fair Housing Act.

In recent years, it became a common practice to include language in the lease agreement that allowed a landlord to sanction or evict a tenant after an arrest. This language may have been included in a Crime Free Multi-Housing Lease Addendum, for instance. If a landlord is investigated for housing discrimination, that outdated language could aggravate the situation.

Also, several local governments recently passed “nuisance” or crime ordinances requiring landlords to evict tenants when police are called to the property. There may be disclosures that a landlord is required to include in the lease.

These nuisance laws have come under judicial scrutiny. If the law changes, then the lease language must be updated. Your attorney can guide you on needed modifications.

Rent Payment Options

Many landlords continue to rely on the threat of late fees to encourage on-time rent payments. However, because of heavy regulation on the use of such penalties, the average late fee is $40. That may not be enough to do the trick. In fact, that may actually encourage cash-strung tenants to hold off on rent payments, using the landlord like a line of credit.

A more effective approach is to Report Tenant Pay Habits. Now, all tenant rent payments can be tracked in a database at www.landlordcreditbureau.com. The information then can be shared with a credit reporting agency so it will appear in the tenant’s credit report. That serves as a powerful incentive for tenants to pay on time, and greatly enhances the ability to screen tenants.

Consider including this policy for on-time rent payments in your lease agreement so that your tenants will make paying rent their top priority.

Regulations Galore!

Local governments have been passing restrictive rental regulations faster than landlords can scream, “Enough!”

Rental laws have always varied from one state to the next, and even from city to city. While these variations have always been an inconvenience, today they are positively mind-boggling. For example, while lawmakers in Seattle are working to keep landlords from collecting security deposits in advance, Arkansas lawmakers are trying to make the failure to pay rent a crime.

Often, these regulations require disclosures that must be included in a lease agreement. These local variations are especially troublesome for landlords who own properties in more than one city or state. Using the same lease form for all properties is not a good practice.

Over the past few years, landlords have been called upon to stop crime, screen tenants for immigration status, and dole out voter registration applications, to name a few examples. Besides the increased burden these laws place on landlords, there is another important issue: Many of these new rental restrictions don’t pass the sniff-test with judges. What is a landlord supposed to do when a new city rental law is found unconstitutional? What if a state’s rules conflicts with federal law? These are good questions to ask your attorney.

In addition, consider active involvement with a local landlord association. Many of these groups provide legislative updates, links to local experts and other resources. It’s more important than ever to be informed.

Joint and Several Liability

Rents are soaring, and as a result many more renters are teaming up. What used to be the domain of college students is extending into the work force. Millennial renters appear to favor roommate arrangements, yet these tenants are the most likely to move suddenly — to chase a new job prospect, get married, or buy a home.

These tenants need to be informed of their responsibilities under the lease agreement. A roommate needs to understand what is at stake should he or she decide to break the lease. Remember, with roommates, it’s one rental home, one lease, one deposit, and one rent payment. Does your lease agreement make that clear?

Landlord Tip: Clarity is key when it comes to enforcing a lease agreement. Not only do landlords need to follow the letter of the law, but tenants need to understand the language in the lease agreement in order to follow the rules. Make sure the lease is easy to read. Be particularly clear on provisions having to do with money. For instance, something as simple as placing rent requirements and rules about the security deposit in separate paragraphs may make it easier for tenants to understand their rights and responsibilities.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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