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.

Short Term Property Management Tips

Whether you are looking to add some extra cash into your budget to make ends meet or you want to supplement your holiday plans by renting out your home, short-term property management can pay off with some big rewards. Even if you just have an extra room, you could make more than $20,000 per year more just by renting it out. Before you get started, however, there are certain things of which you may need to be aware. These 5 short-term property management tips will help you make sure that you get the most out of your rental property.

1. You May Need to Charge a Hotel Tax

Some jurisdictions require that short-term rentals charge a hotel tax. In short, your rental on a short-term basis may be illegal unless you get the authorization to run a hotel on your property. This may require rezoning and that’s a lot of hassle. Even home sharing isn’t a guarantee that you’ll be clear of the law and any profits you make are most definitely taxable at local rates.

2. Make Sure to Thoroughly Vet Your Guests

Many short-term property managers check a Facebook page, look for a quick criminal history, and call the vetting process good. That could wind up setting a landlord up for a bad experience. You’ll want to make sure that security deposits are in place before handing over the keys, a credit check has been done, and other background information in checked – like offender registries that may not show up on a criminal record, like founded child abuse.

3. The Rules Must Be Clearly Known

Your house rules must be posted somewhere on your short-term property to be valid. This generally goes beyond whatever lease terms that you may have. If you charge a smoking fee, then this fee must be posted on the property. You’ll also want to clearly communicate when people can check into your short-term rental and when they’ll need to leave so you don’t have an unpleasant surprise waiting for you.

4. Set a Valid Price Point

This might be the trickiest thing of all for the short-term property manager. The right price is a balance between profitability and image. You don’t want to charge so little that people won’t stay because they think there’s something wrong with the home. You also don’t want to charge too much because you’ll become the option of last resort. Location, current market conditions, and even the seasons can all cause fluctuations in the price of rent that can be charged.

5. Market Yourself

You won’t get many renters if no one really knows that you’ve got a short-term space to rent. Make your description comprehensive and consider having professionals take promotional images and create marketing content for you so that a clear picture can be received by a prospect. A short-term rental is highly profitable when managed correctly. Get started with these 5 tips and start pulling in the extra income you need today.

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.

Rental Property Deductions

Owning a rental property means that you are a business owner and property owner at the same time. Because of this, the owner must be aware of key rental property deductions that you can take every year to help manage your tax liabilities. It is important to remember that these deductions are not the same as depreciation, which happens to your existing structures and value improvements that occur over a specific period of time.

1. Travel Expenses Can Be Deducted

The easiest deduction to take when you travel to your rental property to care for it is the standard deduction, which gives you a certain amount per mile. You can also keep track of actual expenses over the year. Make sure to save all of your receipts and keep an odometer log.

2. Any Emergency Repairs Can Be Deducted

That phone call at 2am might not be a pleasant experience, but it is a pleasant deduction when tax time comes around. Most emergency repairs qualify as a deduction instead of for depreciation. The only exceptions would be if you had to install a new appliance, like a water heater, or a new roof instead of repairing the existing structure. This deduction includes labor.

3. Property Taxes are Always Deducted

Whatever property tax you need to pay on your property can be deducted as an expense on your taxes. In some jurisdictions, all large item taxes, including sales taxes, can also be deducted. This would mean if you replaced the water heater, you’d have to depreciate the appliance, but you might be able to deduct the sales tax.

4. Loan Expenses are Always Deductible

Anything that you need to pay in order to obtain a mortgage or a loan to help your rental property get amortized into the life of your mortgage. It is your interest that is deductible. Don’t deduct your entire mortgage payment, however, because the principal you pay down is not deductible.

5. Sometimes Lawn Care Qualifies as a Deduction

The issue at hand is whether or not the work is actually improving the value of the home. Routine lawn care, like mowing, weeding, or fertilizing are all considered expenses because it is considered maintenance. If you hire a lawn care specialist to install a retaining wall, however, this would not qualify as a deduction.

6. Losses From Theft are Always Deductible

Even if your insurance company has covered your losses, they may still be deductible if you experienced an overall financial penalty. This typically happens through the deductible on the insurance policy and if there is any value gaps between the replacements value of an item and the depreciated value of the stolen item. While you’re at it, don’t forget to deduct your insurance premiums too.

7. Fees or Assessments to Care For Common Property are Deductible

This would include HOA fees, condominium fees, or other payments that are made to help a community or a neighborhood is well-maintained. Just make sure to keep good records so that you can prove all of your deductions should questions be asked of your tax return. By doing so, you’ll be able to maximize the value of yo

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.

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.

How To Fix a Burst Pipe

When you have a pipe burst in your home, either because the weather turned cold or there was a failure in the craftsmanship of the pipe itself or its joints, then here’s some good news: you don’t need some serious plumbing skills to fix the problem.

You’ll just need a few tools, some solder that is lead free, and some replacement pipe and fittings.

The first step is to make sure that you’ve turned off your water supply.

Look for the main valve for your water in a heated area of your home.

Many times the water shut-off is located near the water heater, furnace, or primary electrical box.

Open up the lowest fixture you have to make sure your plumbing system completely drains.

 

1. Allow your pipes to thaw out.

If you have frozen pipes that have caused the burst, then you’ll need to make sure they’re completely thawed out before you begin the repair.

Wrap the pipe with insulation if necessary to make sure the ice begins to melt.

2. Cut out the damaged section of pipe.

When you’ve located where the pipe has burst, you’ll need to cut out that damaged section.

The easiest way is to use a pipe cutter.

Rotate the the cutter around the pipe and keep tightening it a little bit with every rotation until it cuts all the way through it.

You’ll likely have burrs on the cut.

You can clean these up with some steel wool.

Avoid using the kitchen steel wool pads, however, because the detergents can make the job more difficult.

3. Cut a new section of pipe to install.

You’ll need new pipe to replace the burst pipe.

Cut the new pipe to the appropriate size.

Because you’ll be connecting the new pipe to the undamaged plumbing, you’ll need to cut it a little shorter to accommodate the fittings that you’ll need for a water-tight seal.

Make sure you’ve got the same diameter of plumbing pipe as well.

Most homes have ½ inch pipes, but this isn’t always the case.

4. Clean the ends of the pipe.

You’ll need to take that steel wool and make sure all of your pipe and fittings are cleaned up on the edges so that they’ll be able to form an adequate seal.

Take your time during this part because clean fittings and pipe ends are essential for a good connection.

5. Begin the soldering process.

You’ll need to spread some soldering flux on the outside of the pipe end where you’ll be connecting it to your existing plumbing.

Then slide the valve fitting onto the end of the pipe and heat the valve fitting where it connects.

You can hold the flame right up to the pipe, but make sure you’re wearing safety glasses.

As the connection heats up, you’ll want to push some solder into the joint where the valve connects.

The solder melts from the heat and will seep into the connection, sealing it off.

6. Continue until repaired, then turn on the water to check for leaks.

Make sure that the solder has cooled and sealed every joint that needs to be repaired and then turn your water back on to check for leaks.

If you have leaks, you will need to start over from the beginning.

It takes some practice to get soldering down, so take a few minutes to practice your technique before attempting the repair.

In doing so, you’ll be able to solve your own plumbing problems and know how to fix a burst pipe.

Landlord’s Guide to Rental Discrimination

Discrimination is a bad word in today’s society, but landlord’s need to discriminate as much as they legally can in order to get the best tenants possible into their property.

What a landlord can and cannot do is government by local landlord/tenant laws, so before starting any vetting process, make sure to check local statutes for specific ways you may need to be in compliance.

When Is Rental Discrimination Illegal?

In general, tenants are protected from certain types of discrimination wherever the rental home might be located.

The Federal Fair Housing Act and Fair Housing Amendments Act specifically prohibits a landlord from rejecting an application from a tenant for the following reasons.

  • Race or religion.
  • The ethnic background of the prospect or their national origin.
  • Gender.
  • The status of the family, including children.
  • Physical or mental disabilities.

Some laws also specifically prohibit discrimination due to sexual orientation, the age of the applicant, or the prospect’s marital status.

Even subtle differences in the application process, such as setting a higher income standard for certain households or setting different terms in a lease for different demographics could be considered illegal rental discrimination.

When Is Rental Discrimination Legal?

As a landlord, you need to be able to screen dangerous tenants away from your property as much as possible.

This means that the #1 method of legal discrimination that you can implement is a consistent policy of not accepting tenants that have committed certain crimes.

For homes that are near schools, this is especially critical to do because you could be held legally responsible for a tenant who reoffends.

If you’re concerned about how certain households may treat your property, then you may also wish to set a high income standard that applies to every applicant.

Requiring a minimum income is a valid business reason to reject a tenant because you have a certain level of profitability that is required.

Performing a credit check or implementing credit score minimums is another way to help prevent problem tenants from sneaking into your property on you.

If a tenant does not have a positive reference from a previous landlord, then this can also become the cause of a rejection.

Not having a positive reference from an employer, however, is not necessarily something that you can use to reject a tenant.

Not having a job or evidence that a rental lease can be met over a specific amount of time may be a valid reason to discriminate.

Having a poor reputation, but the ability to pay rent consistently, may not be a valid reason to discriminate.

As long as you have valid business reasons to reject a tenant that are not based in any way on the illegal rental discrimination areas that are in place, then you can do so.

This will allow you to be able to effectively screen out potentially problematic tenants so that you can have a long-term investment with your rental property.

How to Insulate Yourself from Expenses with a Great Lease

Owning a rental property can be expensive, and if you’re not careful, you can end up footing the bill for repairs or damages that should be the tenants’ responsibilities.

One important way to insulate yourself from such expenses is to write a great lease that covers as many contingencies as possible and clearly specifies the financial responsibilities of all parties.

While regulations vary from state to state, there are some important items that should be included in any lease or rental agreement.

Names of All Tenants and Limits on Occupancy

Every adult living in the unit should be named and should sign the lease.

This way, each person becomes responsible for the rent and any other terms of the lease.

If one tenant leaves or can’t pay for some reason, you can legally collect the entire rent from any one of the tenants named in the lease.

You, as the landlord, have the right to screen and approve who and how many people live in your property.

So, the lease should clearly indicate that only the adults who signed the lease and their minor children can occupy the unit.

This way, you can evict a tenant who moves someone else in or sublets the unit without notifying you.

Rent and Deposits

The lease should clearly state the amount of rent, when it’s due and how you expect to receive it, such as by mail or delivered to you personally.

Make all details as clear as possible, including the following:

  • Acceptable forms of payment
  • Amount of late fees and whether there’s a grace period
  • Charges for bounced checks

The handling of security deposits causes a lot of conflict.

Avoid any misunderstandings by defining the following things:

  • The exact amount of the security deposit
  • How it can be used by you (to repair damages) and how the tenant can use it (to pay the last month’s rent)
  • When and how it will be returned to the tenant
  • Where the deposit will be held and whether the tenant is entitled to any interest earned

Repairs and Maintenance

Unless the specifics about your responsibilities and those of your tenant are unambiguously spelled out, you could find yourself paying for a lot of damage and repairs caused by a tenant’s abuse or neglect.

Specify things like:

  • Your expectation that tenants maintain a clean and sanitary unit and pay for any damages they cause
  • Their responsibility to notify you of any damages or defective conditions
  • Clearly explained procedures for submitting repair requests to you
  • Limitations on what kind of alterations they can make in the unit without your permission, such as painting or installing appliances.

Pets

If you allow pets, be specific about the size and number of pets allowed and what your expectations are for cleaning up waste in the yard.

Also, include requirements about repairing damage from pets in the repair and maintenance section of the lease.

Other Restrictions

Other terms that should be in the lease include:

  • It goes without saying that you don’t want your tenants doing anything illegal in your property, but to prevent property damage and avoid expensive legal problems, it’s still best to specify this in the lease.
  • Specify what, if any, businesses the tenant may run from the property.
  • Learn about all local laws and health and safety codes, and make sure your lease is in compliance.
  • Specify use of parking and common areas.

A lease is a legal document that is intended to protect you and your tenants.

Include these items in any of your leases to protect yourself from having to pay for something that should not be your responsibility.