Residential Lease Documents Explained

A properly completed residential lease, with all of important components, is essential to a proper landlord/tenant relationship.

It’s in the best interests of all parties for everything to be laid out in writing, so don’t hesitate to ensure that all items are covered.

Remember that each law covering leases will have subtle differences in each state, but the bulk of what’s in a good document applies across the board.

Search state databases for information about what needs to be included.

The information below will help you understand the substance of generally accepted lease agreements.

Rental Agreement or Lease

The primary difference between the two is that a rental agreement is a month-to-month document, while the lease covers a set period of time.

Should a tenant remain after a lease expires, things convert over to a rental agreement based on the final terms of the lease until a new lease is signed or the tenant moves out.

The obvious advantage of a rental agreement is that it allows either party to terminate it on a 30-day notice.

The downside for landlords is just that — there’s more long-term advantages to a lease that implies a time frame.

Of course, that means getting it right and covering all aspects of a lease in important.

Prominent Sections in a Residential Lease

The first section is always the personal and/or business information for both the landlord and the new resident, followed by the physical address of the property as well as any extra details.

If the premise includes furniture or something else in addition to the structure it would be noted here.

The amount of rent will be in another section, along with any security deposits and/or last month requirements.

This information may be be broken down into sections called “terms” and “payments.”

This is where you likely see language detailing late charges and how they are handled included.

The date late charges will be implemented needs should be listed as well.

Further down the lease document will be sections detailing rules about occupants. It’s important to include specific language that limits the amount of time a guest can stay (normally 15 days) to avoid extra residents who aren’t on the lease.

There should be sections outlining pet policy that are clear and concise.

Parking regulations are also important if there is any shared parking or if a landlord wants to limit the number of vehicles that can be parked on the property.

Sections Referring to Termination and Maintenance

The maintenance section details who is responsible for what when it comes to property upkeep, trash disposal and routine repairs.

Utility services can be paid for by the resident or landlord as prescribed in this section the lease.

When it comes to termination, the section should contain specific language that spells out what kind of actions can result in the lease being terminated is important.

The effective dates of the lease should be included here and the options for renewal as well.

Many office supply stores and online services can provide a lease template.

What you want to be sure of is that you are using the correct lease for your state and that it covers all the necessary categories.

Make sure any lease you choose is up to standard as it isn’t something to cut corners on.

How to Read a Credit Report

An individual’s credit report is one of the most important tools landlords should be utilizing to help ensure their properties are rented to the most qualified candidates in the market.

Along with employment and past references, credit is a critical decision making tool, but it’s not as effective if it’s not completely understood.

This sample offers a nice layout and helps with the explanations that follow.

 

Tradelines

This is the area on the report where you will find information on accounts and how long they have been open.

The trade term “seasoned tradeline” indicates one that has been open for a long time.

Usually, the longer an account is open, the more positively it influences a credit score.

There are companies that will essentially sell tradelines that are meant to boost the credit rating.

While the practice may seem unethical, it’s not illegal.

It’s one reason landlords should be wise to look beyond just the credit score.

Tradelines will start by listing the lender and the loan type, such as credit card, car loan, or line of credit.

Next, the report will list a designator and then the industry the credit falls under.

Last, it will list the current status of the account, which is the most important section — you want to rent to people who are current on their credit obligations and rarely late.

Collections

As you might assume, this section will provide alerts regarding any accounts going to collections and whether they are still open or have been resolved.

If a person had  an account go to collection but has paid it off, it will still be listed in the Collections section.

An update in August 2014 changed the way medical bills reflected on credit reports, lessening their impact, which is a big help for consumers who were hit by enormous medical bills and were simply unable to pay them.

But remember, if a person walked away from routine obligations such as cell phone payments or a credit card, they probably aren’t the best candidate — though context should also be considered in such situations.

Context

It’s important to look at any credit report through a lens that takes into account some level of context, which is what the new rule on FICO score reporting is meant to provide.

However, it may be years before the changes are fully implemented, so it’s helpful if those who are reading credit reports understand context too, and not just with regard to medical bills.

If a potential renter has a lower score because of medical costs going to collection, it’s not by itself an indication of risk when it comes to paying rent on time.

Another situation where a little leeway is good is if a person is coming off of a divorce.

If the shared bills have had to go to collection and your applicant can show they are otherwise quite responsible, that’s worth taking into consideration.

Employment

This section tells the reader about the place of employment, but you need to be aware that it’s one of the most inaccurate sections of credit reporting.

Frequently, employers aren’t listed at all, or the reporting agencies list people working someplace when in fact they haven’t for years.

Employment is best verified outside of the credit report.

Errors

The high confidence everything from banks to employers and even dating sites place on credit scores might make you assume they are correct, but the truth is that credit reports can often report errors.

If a report is telling you something about a potential renter but that person has evidence to the contrary, it’s probably an error.

Many people don’t find out their credit reports have mistakes until they have their credit run, so it’s possible they were completely unaware.

How to Verify Contractor License

In most jurisdictions, a contractor must be licensed as a business and in their chosen specialty.

This specialty license is issued by the Department of Labor and Industries or similar agency, and a number is assigned to the contractor.

Most contractors are required to publish this number in all public communications.

To verify the contractor license to see if it is current and there are no registered complaints, simply ask to verify the number with the government agency.

This can often be completed online. If your jurisdiction doesn’t require a specific contractor’s license, there are some other ways to verify their credentials so greater confidence in the company or individual hired can be had.

1. Ask For Their Certificate Of Insurance.

Contractors must be insured in every jurisdiction in order to conduct business.

This is because they are making a change to a property in some way.

Whether acting as a handyman or a specialized contractor, the Certificate of Insurance will verify their coverage and the presence of a surety bond if needed.

2. Ask For a Physical Copy Of The License.

If a contractor has been licensed to complete work, there will be a paper license issued.

It is required to be displayed in a prominent location and accessible for inspection.

Although you won’t have a contractor take this license off their wall and take it to your home, you can visit the contractor’s office and ask for a copy of the license to verify its validity.

3. Create An Inquiry.

If there isn’t a way to specifically request a license verification, then you may be able to create a local inquiry to get the information that is needed.

This is typically through the state licensing board, but it could also happen through a local trade union as well.

Be aware: this process may require a specific written request that cannot be submitted online and it may take up to 90 days to complete.

Knowing how to verify a contractor license is generally pretty easy.

Get the name of the contractor, find their assigned number, and conduct an online search through the appropriate government agency.

If that option is not available, then use these additional options to get the information needed today.

5 Golden Rules to Create Model Tenants

After investing in your rental property, your tenants become your most valuable asset.

They help determine your staying power in the real estate business, and therefore serve as valuable additions to your property’s value.

Selecting good tenants is a difficult role for most landlords, but not because of the caliber of tenants.

There are many decent potential tenants waiting on the right housing opportunity.

The problem lies with the approach to finding the right tenant.

1. Property Appeal—“Like Attracts Like”

Before you can find the right tenant, you need to invest in your property.

When your property looks immaculate and is located in a desirable part of town, it will attract the kind of tenants you want.

Conversely, if it looks “run down,”  it’s unlikely you’ll find the model tenant you are looking for.

Since “like attracts like” in the real estate industry, landlords with well-maintained properties are more likely to attract tenants who are willing to uphold the same standards of house maintenance as you are.

2. Lease Agreement—“Your Word is Your Bond”

Like a marriage contract, the terms set out in your landlord-tenant agreement are legally binding.

To foster a long lasting future with the ideal tenant, start the relationship off on the right footing; draft a lease that is reasonable and respectful of the needs of both parties and be sure to review the document in full with your prospective tenant.

Even after the lease agreement is signed, differences can arise.

Experts strongly recommend that both parties attempt to resolve any issues with each other before seeking outside help.

Probably the most important advice to resolving landlord-tenant disputes is for both parties to read the lease agreement and become familiar with each other’s obligations.

3. The Rental Business—“It’s a Business Relationship Not a Friendship”

Communication is at the core of any great relationship; however, it’s a very different dynamic when a tenant thinks of you as a friend.

With friendships, special privileges and concessions are expected and that can compromise your business investment.

Be courteous and professional.

Keep your relationship on a business level, communicating clearly any new arrangements to be implemented and ensuring terms are understood before documenting.  

4. Property Maintenance—“Happy Tenants are those who are Routinely Maintained”

Happy tenants are extremely important to your real estate business, and good tenants are happy tenants.

The way you keep them contented is by keeping your property in good shape.

Fix leaks, replace old fixtures and fittings, and inspect the home annually.  

You may want to keep a list nearby of good plumbers, electricians and tradesman to refer to when needed, if a problem were to arise.

5. Negotiate on Some Terms—“Yield to Understanding”

Don’t be too rigid with house rules that you scare away good tenants—be flexible and negotiate.

You may hate having pets on your property, but if a responsible tenant wants to move in with a family cat, there is little harm in making revisions to accommodate that request.

As long as all newly negotiated terms are in writing, your leniency will stand to benefit your relationship in unexpected and fruitful ways.

Many landlords find that being pet friendly makes them stand out from the crowd.

Often they attract good tenants who are happy to pay more rent for pet accommodation.

Model tenants reliably tend to their obligations.

They pay the rent on time, take care of your property and are respectful neighbors in the community.

The bond you help create with your tenants can only strengthen your investment.

Protecting Vacant Properties From Vandalism

Most rental properties undergo a vacancy period at some point, whether they’re between tenants or yet to be rented.

Vacant property is a frustration and concern for landlords because the owners aren’t earning income during this time, and the house becomes at risk for potential problems like vandalism.

A study by the US Department of Justice revealed that 4.4% of homes in 2005 were vandalized.

Vacant homes tend to be more likely to be affected, but there are a variety of ways to protect vacant properties from vandalism:

Keep the Property in Great Shape

A vacant property should have the yard maintained regularly, as this appeals to potential renters and unit also signals that there are people frequently moving in and out of the property.

Property owners should tend to the grass and gardens, keep sidewalks shoveled in the winter and remove leaves from the gutters.

Add a few personal touches, such as welcome mats or seasonal flags, so the property does not appear vacant.

Leave the Lights On

Lighting is another important factor in keeping vandals away.

The small cost of keeping utilities on between tenants allows the lights to be kept on, deterring vandalism, and makes it easier for potential residents to tour the property.

Outdoor motion-activated lights flooding the yard and a few interior lights create the illusion that the house is occupied.

Install a Security System

Installing a security system can be pricey, but compared to having vandals destroy a home, this initial investment can actually save you money in the long run.

According to the FBI, property crimes in 2012 resulted in an estimated loss of $15.5 billion.

Future tenants can also use a monitored security system, adding to the property’s value and giving landlords an additional feature to promote.

Monitor the Property

Security systems are valuable, but nothing beats a real, live person.

Landlords need to visit the property often and not on a predictable schedule.

Potential vandals may watch the property for a few days before the actual crime takes place, so the landlord making random checks is an important deterrent.

Stop by at various times to make adjustments to which lights are on, check that all the window latches are locked and note any projects that may need attention.

Also, gather up mail or flyers at each visit and ask the showing agent to assist in getting rid of these flyers as well.

Junk mail building up is a shining beacon to those looking for vacant properties.

Ask the Neighbors

Neighbors living near a vacant property are probably just as anxious to see the property filled as the landlord.

It’s always a good idea for the landlord to make positive connections in the community, so let the neighbors know of your plans to find a new tenant and ask if they can assist in watching the house.

Leaving a business card with contact information is a good idea so your information is readily available.

Vacant properties are not the stuff of landlords’ dreams, but they are a natural part of the business.

Signs of activity, security systems, lighting and personal visits help prevent vandalism to vacant properties.

Landlords should remember that marketing strategies, well-written rental ads and a presence on rental websites are important in making sure that the property does not stay vacant for long.

Four Must-Haves for New Landlords

You’re ready to take on your new role as a landlord, and you’re motivated to be successful.

Equipped with the right tools and mindset, you can successfully manage your property, ensuring that your place remains well maintained and your tenants are pleased with their new abode.

These four must-haves will make your tenure as a landlord easier and more successful.

1. Detailed, Signed Lease

Get everything in writing before you hand over the keys.

A well-executed lease clearly outlines the rental agreement between you and your new tenants.

Should questions arise, both parties can defer to the lease to find clear answers.

Thus, a thorough and detailed lease is essential.

Draft an ironclad lease that includes the following information:

  • Names of all occupants
  • Start and end dates of the lease
  • Detailed fees, including monthly rent, security deposit, pet deposit, and cost of vacating early
  • Expectations for landlord and tenant regarding interior and exterior maintenance
  • Restrictions, from pets or long-term guests to cars parked on the street
  • Expectations when the tenant moves out, whether the tenants need to fill holes in the wall, clean carpets, or hire a cleaning service

2. Reliable Maintenance Services

Part of your responsibility as a landlord is to maintain the house. Your lease should outline those repair and maintenance activities, and you should be prepared for these inevitable problems to arise.

If you don’t plan on tackling the repairs and maintenance yourself, have a trustworthy team on call when a problem arises.

A general handyman can be helpful for sporadic and unexpected problems, such as a door that won’t latch when closed.

You’ll also want a trustworthy plumber in case a toilet runs or kitchen leak occurs.

Call your electrician when an appliance zaps out or lights unexpectedly blink.

Finally, if your lease states that you’re responsible for lawn maintenance, you will want to find a lawn care company to mow the grass and weed any planting areas.

By having a team of contractors on hand, you can quickly address any issues as soon as they occur.

Your tenants need working appliances and lights and functioning plumbing, and it’s your responsibility to promptly address any repairs.

3. Efficient and Open Communication

You can excel as a landlord if you are accessible. It is essential to maintain open lines of communication, and the communication starts with you.

Provide your tenants with a phone number and email address so that they have multiple ways to reach you.

Ask for the same contact information from them.

When you hand over the keys, ask your tenants how they prefer to be contacted – by phone or email – for any housing-related questions or concerns.

Respond to voicemails and emails promptly, ideally on the same day you receive messages.

Even if you cannot take care of a repair the day your tenant reports it, your efficient response to the problem shows that you’re willing and able to help.

4. Property Insurance

Even though you aren’t living in your rental, you still need to protect it.

Property insurance is available specifically for landlords and allows you to protect your investment in case of damage.

Landlord insurance is available on all property types, including duplexes, single-family homes, and row homes.

Landlord insurance coverage varies depending on your policy, but you can choose policies that cover everything from vandalism and natural disasters to personal injury and loss of rents.

Best Payment Options Landlords Should Accept for Rent

Regular, on-time rent payment is critical in ensuring your business remains profitable and running smoothly. Sometimes, however, rent isn’t paid – from lack of funds, travel, or just forgetfulness. Offering a variety of options might be a good solution to helping your tenants stay on track.

Let’s first start with the old standbys – check and cash. While these can save on processing fees, they do present a few important drawbacks:

CHECK PAYMENTS

A check is a secure and convenient way for tenants to pay in advance and not have to meet you in person. However, if the tenant does not have the funds in their account, you can’t collect and they get fined, further compounding their ability to pay.

CASH PAYMENTS

While there is no fee required, no chance of a bounced check due to insufficient funds, and it might be easier to manage for tenants without a bank account, accepting cash payments for rent is not a widely accepted practice for several reasons:

The payment isn’t traceable so discrepancies cannot be proven, tax season may be more difficult, and it will require you to make time every month to meet with one or more tenants for collection and to deposit the cash.

In addition, many tenants prefer not to deal with cash or checks. Providing additional options is essential for attracting their business.

Offering the option to pay by ACH, credit, or debit cards can help you avoid the issues mentioned that come with cash and check, but there are a few other benefits as well:

ACH PAYMENTS

Some banks will allow ACH transfers, but often landlords will use a property management platform to request and accept rent payments, especially if they would prefer the tenant covers the additional cost to pay online. Your tenant can set up their bank account online and the funds are transferred from their bank to yours so that you can avoid physically handling cash and checks.

But just like payments made by check, you may receive a NSF (non-sufficient funds) alert from the tenant’s bank if they do not have the funds to cover the payment.

CREDIT CARD PAYMENTS

Some tenants welcome the opportunity to pay by credit as it could buy some time if they are short on cash one month.

Others will find this an attractive option because they can rack up substantial rewards points this way.

Offering this convenience can go a long way in helping a potential tenant choose your property over another.

DEBIT CARD PAYMENTS

A debit card might be a good middle ground between a check and a credit card.

There is no extra verification period (like for an ACH payment). The funds are transferred quickly and the tenant doesn’t need to have a credit card, just a bank account.

This offers convenience to the tenant and, therefore, more confidence for a landlord that payment will be made on time.

Do I Need A Real Estate License To Manage Property?

Professional licensure requirements in the United States are intimidating to many novice property managers.

Many times, if a property manager is working for a larger company, the company will make these requirements clear.

Both a company and its employees can receive hefty fines, mandated continuing education, or worse if an individual at the company is practicing without a license.

However, if property managers are starting out on their own, they don’t have that kind of guidance and may not even ever take into account that they need a license.

What’s worse, whether a property manager needs a license – and how he acquires that license – varies from state to state.

Each state and the District of Columbia sets its own laws by statute, which are then interpreted as needed by the individual state’s real estate board or equivalent, resulting in widely disparate laws.

Furthermore, calling up the state’s licensing board about the finer points of licensure requirements may not result in a useful answer.

Curious property managers may be able to ask their questions directly of the board and get an answer to their practice question, depending on the state.

But many boards refuse to answer pointed questions about licensure on the grounds that they cannot give anything that can be construed as legal advice or advice about individual cases.

Ignorance Is No Excuse

As a rule of thumb, no matter the state, all professionals are expected to know the licensure requirements of the state where they work.

 In other words, the burden is on them and any company they’re affiliated with, and not on the licensure board.  

Property managers should make sure they do their homework about licensure requirements and stay abreast of new developments, whether via news sources or the licensing board’s website.

In most states, property managers need to have a real estate broker’s license.

In addition, some states may have requirements for a property manager, or a real estate broker more generally, to be affiliated with a company, or licensure requirements may be less stringent if the professional is with a company.

Yet again, it’s a good idea to check with the state in question.

However, some states (as of this writing, Idaho, Kansas, – for residential property management – Maine, Maryland, Massachusetts and Vermont) do not require a license for property management.

Still other states and districts (D.C., Montana, South Carolina and South Dakota) require a license that is specifically for property management rather than including property management as a subset of real estate.

Some states, though not many, have still other requirements for managing a community association.

How to Get a License

The requirements for getting a license – what the individual needs to do – vary from state to state as well.

Most states require that an aspiring licensee be of age (over 18 or over 21).

Often licensees need to take courses and pass an exam, although these requirements may be waived if the licensee can practice law in the state.

Once the license is issued, keeping it up usually involves paying a fee on a regular schedule and possibly also taking continuing education.

Specific courses may be mandated by the state, or the license’s first renewal may not require CE, so be sure to check.

If this is all still confusing, check to see if there’s a state-level professional real estate organization that can clarify, or contact the licensing board with questions.

Even if it seems clear, or especially if there are rumors that the licensure requirements may be changing, it’s never a bad idea to get in touch with somebody to be sure.

It only takes a minute, and the consequences of unlicensed practice can be serious.

Common Maintenance Issues and How a Landlord Can Resolve Them

One of the biggest challenges that landlords face on a continuing basis is maintenance.

No matter how new or how well-built the property is, sooner or later you will have to deal with repairs and maintenance needs.

For first-time landlords, this can be especially difficult if they don’t know where to turn.

Have a Plan
Minor repairs can happen at any time, but they most often occur when it is least convenient.

You will get a phone call when you are sitting down to dinner or getting ready for bed.

To prevent the inconvenience that this can cause, you need to have a plan in place to ensure the issues is quickly and efficiently resolved.

Some issues are regular occurrences, like heating and HVAC problems, backed-up plumbing, and lockouts.

Be prepared for these situations by contracting with a company that you can call any time you need their services.

You can give the company a key and sign a contract for 24-hour service with a specified response time.

Just make sure you let tenants know that this is the procedure for these calls.

Larger problems such as a leaking roof may require a temporary fix until a more permanent solution can be provided.

In some cases, the roofing contractor may handle the situation while other times, you may need to find someone else who can stop the leaks temporarily.

Always know which companies you will contact for the various problems you are likely to encounter and find out exactly what services they provide and in what time frame they respond.

Hire Someone to Handle Maintenance Issues
For a larger rental complex, you may want to hand off maintenance calls to a service or manager.

You have several options to choose from:

  • An answering service takes calls from tenants and contacts the appropriate repair company to handle the work based on your instructions. They relay the problem to you on the next business day or with the call logs.
  • A property manager takes care of all tenant problems, including maintenance requests. The manager updates you or contacts you for unusual problems.
  • Pay a tenant to handle simple maintenance issues in exchange for reduced rent.

No matter which option you choose, you must have a clear plan of action for the most common repairs and maintenance problems.

Make sure that you relay the important information to all parties, including when you want to be contacted and how you will be informed of any resolved issues.

You also want to have a standard process for what to do when something unexpected arises that is not part of your plan, such as a flooding or a fire.

When major issues occur, you should have an emergency plan in place and procedures for the next steps.

You must provide a valid number where you can be reached or another person to act in your stead if you cannot be reached.

Having a complete maintenance plan in place helps you and everyone else know what to do when something happens.

It is also important that you relay the basic procedures to your tenants.

Let them know what steps will be taken and the timeline that they can expect a phone call or the issue to be resolved.

By having a plan in place, it protects you from minor repairs turning into major problems, and it keeps your tenants happy.

How To Repair a Leaky Outdoor Faucet

Outdoor faucets eventually begin to leak and it can become an annoying issue.

Sometimes more water comes out of the faucet than it goes into your hose or sprinkler system.

You can fix the outdoor faucet pretty easily in most instances, but depending on the size of the leak, you may need to replace the entire faucet.

 

The Seals and Gaskets Wear Out in an Outdoor Faucet

The #1 repair for a leaky outdoor faucet is a seal or gasket that needs to be replaced.

They’re often made of rubber or even plastic today, so over time, they just wear out.

You’ll be able to access them by taking the removing the handle of the faucet to access the interior hardware through the retaining nut.

When you’re there, check to see how tight it actually is.

A loose retaining nut may be the cause of your leak.

If the retaining nut is tight, then you’ll need to remove the faucet stem.

It’s usually easier to remove the stem by installing the handle again so you can grip it.

Sometimes you have to even turn the handle to remove the faucet.

Replace the Washer Assembly In the Stem

With the faucet stem out, you will notice that there is a washer assembly that can typically be accessed by a Philips head screwdriver.

Unscrew the item and you’ll be able to see which washers have failed. Keep track of how the parts go together so you can replace the faulty item and then reinstall the washers on the stem.

You may also need to replace the stem packing or remove the vacuum breaker cap to locate the faulty parts.

The vacuum breaker can sometimes fail because of dirt or sand that gets inside the faucet itself.

If you clean the breaker, then you may fix the leak.

If all of that fails to work, then you will likely need to replace the entire faucet.

If your faucet is screwed onto your plumbing, then you can just remove the old faucet and attached a new one.

If it is a one piece unit, however, you’ll need to cut it off and then solder the new outdoor faucet on.

By following these steps, you’ll know how to fix a leaky outdoor faucet.

It only takes a few minutes to repair and in return, you won’t be risking future water damage to your property once it gets fixed.