Becoming a successful investment property owner in Chevy Chase, MD takes a lot of real estate expertise.
You must be familiar with how to:
- Finance and purchase rental properties
- Place high quality tenants and collect timely rent payments
- Maintain and repair your property whenever an issue arises
- Keep your tenants satisfied so they will want to renew at the end of their lease term
However, one of the most important things to know and understand as a Montgomery County property owner is how to construct the perfect lease agreement.
Knowing how to protect the interests of you and your investment property via a signed lease agreement is crucial to avoiding legal problems in the future.
But do you know what common mistakes even the most experienced landlords make when drafting a lease agreement for their rental property?
If not, you are not alone.
Many property owners do not have the help of an experienced property manager to draft thorough lease agreements that touch upon everything that is important to the owners.
And, unfortunately, as a result, these mistakes cause harm to their rental property business.
Today we are going to examine some lesser-known mistakes you might be making with your lease agreement, in hopes that you can become the successful property owner you desire.
5 Mistakes You Are Making With Your Montgomery County Lease Agreements
So many things go into drafting into a solid lease agreement.
Whatever provisions you decide to add, be sure to always include the following basics:
- Tenant names and personal information
- Lease term start and end dates
- Rent collection amount and procedures, including late-payment penalties
- Security deposit and pet fee deposit amounts
- Additional fines, fees, and charges your tenant is obligated to pay
- Property access information
- Proper use of the property and consequences for breaking the rules
- Signatures of both parties
Failure to include any of the above is automatically considered a major lease agreement mistake. This is general information that all lease agreements should include, no matter what.
However, some things are more landlord-specific that can be considered a mistake as well, if not drafted correctly into your lease agreement.
Read on to find out if you are making any of these lease agreement mistakes so that you can fix them come the next time you place a tenant in your Chevy Chase rental property.
1. Using Outdated or Incorrect Forms
For those that self-manage their Chevy Chase rentals, it is important you take special care when deciding which lease agreement forms to use in drafting a lease agreement for your rental property.
Found all over the internet, so-called “standard” lease agreement forms can be a dangerous thing to use without making sure they comply with your state’s laws.
Here are some of the problems you may encounter when using a cookie-cutter lease agreement form:
- Lease provisions you want included may not be on the form you are using, and are thus unenforceable
- Overly strict clauses may be included that place an undue burden on both you and your tenants
- Incorrect rules and regulations may be written into the lease agreement unbeknownst to you or your tenants that can cause a dispute later on
If you are not using a reliable property management company that knows how to draft a legally compliant lease agreement highlighting all of the provisions you want, make sure the standard form you use is up-to-date and is compliant with federal, state, and local laws.
2. Not Including Insurance Requirements
Though not a legal requirement, Bay Management Group encourages all of our property owners to require their tenants to have renters insurance prior to moving into their rental property.
Here is a quick roundup of reasons why renters insurance is so important, and how not including this in your lease agreement can be a huge mistake:
- It lessens your chances of losing a lawsuit if your tenant’s personal belongings are damaged, or a tenant or their guest is injured on your property
- Renters insurance covers damages that may otherwise come out of your homeowners insurance (or worse, your own pocket)
- It decreases the chances your tenant will leave mid-lease in the event of an emergency because everything including damages, temporary shelter, and food costs are covered
- It helps you place higher quality tenants that are okay with paying the small monthly fee for added protection
3. Not Requiring a Cosigner
Not requiring a tenant to have a cosigner, and still approving them to reside in your rental property, can be a major mistake.
When you are screening tenants to place in your Chevy Chase rental property, it is important you ensure the tenant has the following attributes:
- A verifiable income that meets your monthly demand
- Proof of employment
- Quality references including employers, personal, and prior landlords
- No criminal history
- No prior evictions
In an ideal world, every tenant that is interested in leasing your property will make plenty of money, have verifiable references, employment, and previous renting history, and will not have a criminal background.
However, in the case that only some of this is true, building a required cosigner clause into your lease agreement will better protect your interests in the long run.
By allowing your tenant to have a cosigner, you will have better protection should your tenant not be able to pay rent, incur damages beyond normal wear and tear, or have roommates that do not fulfill their part of the lease obligations.
4. Failing to Outline Tenant Responsibilities
While residing in your Montgomery County rental home, your tenants are responsible for the general maintenance and upkeep of the property. After all, they will be residing in it for some time and should care for it as though it is their own home.
However, failing to outline in the signed lease agreement exactly what your tenants are responsible for is a mistake on your part.
Sure, you are obligated to provide a safe and habitable home for your tenants. But what about things such as:
- Plumbing fixtures
- Pest extermination
- Simple maintenance such as light bulb replacement, air filter changes, and smoke alarm batteries
- General cleanliness both inside and outside of the property
These are all things that many tenants will take care of without you asking.
However, in order to protect yourself from a dispute in the future, it is best to spell it out for your tenants in the lease agreement.
Additionally, consider adding some general maintenance tricks and tips into the tenant welcome package you should provide your tenants upon move-in.
5. Rules Regarding Roommates
If you are going to allow roommates in your Montgomery County rental property, it is imperative you draft the lease agreement to include some of the following information:
- Adult Tenant Screening. Require a full background check on any adult that will be residing in your property, regardless of whether they contribute to the rent each month or not.
- Security Deposit Information. In addition to the general language that goes into a basic lease agreement concerning a security deposit, include additional information outlining that any unpaid rent or damages to the property, regardless of who is at fault, will be taken out of the security deposit at the end of the lease term.
- Liability Clause. Failing to add a clause concerning joint and several liability is a big mistake on your part if you allow roommates in your property. You want to ensure that if one roommate disappears, the other will be held fully responsible for rent each month, as well as damages at the end of the lease term.
- Breach of Lease Provision. Your tenants must be aware that the behavior of one roommate affects the entire group of people living in your property. Include in your lease agreement that you have the right to terminate the lease for all tenants residing in your property, even if only one person breaches the lease.
In the end, drafting a lease agreement is a large task. And, for those that are unaware of the complexity that comes with lease drafting, it is easy to make mistakes that carry far into the lease term and actually harm your rental property business, investment property, and bottom line.
If you own property in the Montgomery County area and need an experienced property management company to help you draft the perfect lease agreement for your rental property, contact Bay Management Group today.