When it comes to the inner workings of a lease agreement, power isn’t measured by size. There are some seemingly insignificant provisions that do far more than you might expect:
1. Identity of Tenants
“This Agreement is entered into between . . .”
Simple language, but carelessness here can land you in hot water. Only those tenants listed on the lease agreement are subject to its power.
Prevent enforcement of the lease, including rent payment provisions;
Hamper eviction and recovery of the unit;
Stall the ability to obtain a monetary judgment; and
Thwart any attempt to collect money owed.
Every adult who will occupy the unit must be listed here.
Use only full legal names, spelled correctly.
The names should match the person’s photo ID.
Signatures should match the names — no nicknames or aliases.
2. Purpose or Limitation Clause
“These Premises are to be used solely as a private residence.”
In-home businesses can increase liabilities and costs for landlords, including:
Increased liability for slip and fall injuries and other premise liability;
Risk of tenant complaints over parking congestion, noise and strangers at the property;
Higher costs of paid utilities; and
Problems associated with short-term vacation sublets.
Discuss this provisions with incoming tenants. Demand that tenants consult with you and seek your consent before setting up shop in the rental unit.
Note: Day care activities may be exempt. Check your local rental laws.
3. Joint and Several Liability
“Tenants shall be jointly and severally liable for all obligations under this lease.”
With today’s soaring rents and an influx of millennial renters, roommate arrangements are popular. But that doesn’t mean you need a revolving-door policy. This provision is designed to allow you to collect rent from one or any of the tenants. This provision also works as a deterrent for any roommate who is thinking of leaving before the end of the lease term.
To maximize the effectiveness of this provision, point it out and explain what it means to tenants, who may not fully understand it. Remember, a lease is all about prevention.
Honor the clause by not dealing with roommates separately. One lease, one rent payment, one deposit, and so forth.
4. Property Inspections
“Landlord may enter the Premises to conduct routine property inspections.”
By reserving the right to conduct inspections, you can better supervise the property. Even if you don’t show up to inspect the property (you should do it!), at least this language can make tenants think twice before:
Conducting criminal activities;
Modifying the unit;
Damaging the property;
Keeping the property perpetually dirty; or
Bringing in unauthorized guests or pets.
Discuss the provisions with incoming tenants, including examples of what you might be looking for during an inspection. The deterrent effect may save you money down the road.
Provide the tenant with notice prior to the inspection pursuant to your local rental statutes.
Do your best to make the inspection a win-win. This is an opportunity for the tenant to discuss any concerns and ask questions. Tenants who are involved in the process are more likely to recognize that they stand to gain when the property is safe and comfortable.
5. Modification Clause
“This Agreement cannot be modified except by express written consent of both parties.”
The purpose of this clause is to limit what a tenant can say in court if there is a dispute.
It also requires the tenant to come to the landlord and discuss any proposed changes to the lease arrangement.
When the lease is modified, keep any written changes with the original lease agreement.
There is a difference between modifying the lease and substituting the lease for a new one. Each has different legal ramifications, so talk to your attorney first before signing off on any changes.
6. Integration Clause
“This Agreement, along with any attachments, exhibits, and amendments, constitutes the full and final agreement between the parties.”
An integration clause is typical in any contract, but when used in lease agreements, it’s like having a virtual assistant. This clause:
Helps to organize the documentation that goes along with the lease;
Requires all pertinent leasing documents to be in one place;
Serves as a cross-check that all the necessary attachments — like a smoke-free addendum or lead paint disclosure — are, in fact, attached; and
Prevents tenants from claiming that some other promise was discussed.
Consider this provision a reminder to:
Check all the page numbers for missing sections.
Make certain every exhibit, attachment and so forth is mentioned in the lease, and that everything that is mentioned in the lease is attached.
Point out to tenants that what is in the lease is final, so any concerns can be discussed before they sign it.
7. Renters Insurance
“Tenant is required to maintain a renter’s insurance policy.”
“Tenant is encouraged to maintain a renter’s insurance policy.”
It’s becoming increasingly popular to require this insurance, which can protect tenant’s personal belongings and, in some cases, protect the tenant from liability. However, it also is common to leave the decision up to the tenant. This insurance is necessary because the landlord’s insurance typically does not cover the tenant’s personal losses. Tenants with renters insurance are better able to recover from catastrophic losses and to continue to pay rent.
Even if this provision is voluntary, take the time to explain that the landlord’s insurance will not cover the tenant’s personal belongings in the event of fire, theft or any number of other catastrophes.
A good way to encourage tenants to buy the insurance is to have them value their own property. Once they start to make that list, the cost of the insurance may seem nominal compared to their potential out-of-pocket losses.
Avoid tacking on a fee for the insurance or partnering with an insurance carrier when making this insurance mandatory. That can make tenants feel exploited.
Once a lease agreement is signed, it is difficult to add new terms. Should you decide to change any provisions of your lease agreement, keep in mind that you may have to wait until the next tenant moves in. Speak with your attorney if you have questions about your lease agreement.
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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.