A Guide To Structuring Lease Agreements: The Foundation Of Rental Relationships

Between 1,000 and 2,000 lease disputes make their way to court each month. If you’re about to become a landlord, you need a fair, legally compliant, and air-tight lease agreement to protect your interests and tenants.

Getting a jumpstart on the planning and educating yourself on the best practices can help you reduce the time lease negotiations take and reduce your stress during (and after) the lease process.

Keep reading for a thoroughly brief guide to structuring lease agreements and setting a stable foundation for your rental relationships. For our ultimate list and guide to residential rental property lease agreements, click here. 

What Should Be Included In A Lease Agreement?

Before plunging yourself into a lengthy landlord-tenant relationship with a complete stranger, you need assurance that they will take every precaution to diligently protect your property and that they will respect your agreement. Here are the top clauses you should consider including in your lease agreement:

Personal Information

Both you and your tenant must have the means to contact each other. You should include a clause that allows the tenant to fill in a comprehensive overview of their contact details, and yours. 

Property Description

The property description details all of the assets you have in the property, along with all of the features included. The tenants will understand exactly what they’re getting from the arrangement, and you will have an inventory of every facet of the property’s amenities. The property description can also include details about the property’s condition, including parts of the property that are brand new. 

So, suppose the tenant decides to abuse one of these brand-new elements, such as a washing machine. In that case, a documented reference will show that the property amenity was in peak condition when they received it.

Intended Use Of The Property

You can establish limits on how the tenant uses the property to protect yourself and your property legally and physically. You can prevent the property from being used as a business establishment or a multi-family residence. Here, you can also set limits for how many people can reside in the property simultaneously.

You can even stipulate that tenants must not tamper with any installed security features, such as intercom systems or CCTV cameras, and must promptly report any faults so the landlord can arrange repairs.

Lease Terms And Conditions

Lease terms and conditions state the duration of the contract, the rental price, and the intended lease start date. It will also include the payment dates and payment method and demonstrate any basis for changing the rental price – such as economic instability.

Security Deposits

You may also wish to include a section regarding a security deposit based on the value of the property’s amenities and the value of the property itself. Your security deposit protects you should the tenant break anything that’s not included in your home insurance policy, and you keep it should you detect any damage upon the tenant’s departure. 

Legal Clauses

The legal section of the contract dictates that you are not responsible for any injury that the tenant receives in the event of a fire or home-related disaster. It also states that you are not aware of any unsafe fixtures in the property. 

The legal clauses also demonstrate any breaches of contract that will result in the tenant being evicted, such as rental arrears or severe property damage.

How To Structure Your Lease Agreement

Now that you know what should be included in your lease agreement, let’s discuss the proper structuring for your lease. You must begin by separating the lease into two categories – the tenant’s side and the landlord’s side. Both will include information relevant to each party and will contain contracts for the affected party to sign.

Here’s the order in which you should state your lease terms:

1. Personal information: You should begin the agreement with a section for each party to fill out their personal details for easier retrieval.
2. Property description: Then, you will describe the asset that’s being purchased via lease.
3. Lease Conditions: Any legal clauses, terms, conditions, and intended use of the property will be discussed at length.
4. Lease Period: Any information regarding prices, deposits, rental period, and start date should be agreed here.
5. Contract of sale: The last portion of the agreement is where the affected party will sign to complete the transaction and agree to uphold the standards you have agreed upon.

Summary

Now that you know the best clauses and sections to include in your contract, you can enter into a landlord-tenant relationship with complete protection. You can also ensure that the tenant respects your property during their lease. Structuring your lease in a legible format will make it easier for the tenant to read and understand the terms before signing.