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The Most Common Lease Clauses Explained

Once your Bethesda property management company has found a suitable tenant for your rental home, and you have agreed on the terms and conditions of the lease, it is time to place those terms on paper in the form of a legally binding contract.draft-lease-clauses-bethesda-montgomery-countyThis contract, also known as the lease agreement, is a formality that each party must agree to and sign so that both you and your tenants are protected.

While some lease agreements are short and sweet, sometimes they can be pages and pages long, outlining every single detail that is involved with leasing your rental property.  Further, as you gain experience as a landlord, you may choose to add additional provisions into your once simple lease agreement template.

Today we will look at some of the most common lease agreement clauses and riders that many landlords outline so that both landlord and tenant understand their legal responsibilities.

Having a basic understanding of each of these lease clauses will help you in the future when you are drafting a lease agreement for your Bethesda income property .


The Basic 5 Lease Clauses

All lease agreements must include some very basic personal information regarding the terms of occupancy.

Here are the basic 5 lease clauses that should be in every single lease agreement:

  • Involved Parties. Every lease agreement must clearly state in full who the lease agreement is between.  In the case of your Montgomery County property, this means outlining that the agreement is between you (the landlord) and the tenant.  It is a good idea to include somewhere in this provision whether you are employing a Bethesda property management company as well.
  • Identification of Property. Outline the name of your property and its full mailing address.
  • Terms of the Lease. This clause determines for how long the lease agreement will be valid.  This includes the start and end dates of occupancy.
  • Rent Payment Terms. This will show the tenant what financial responsibilities they have for leasing your Bethesda home.  It should include the rent amount and when it is due.  In addition, any grace periods, late fees, and all details regarding the submission of payment should be included.
  • Acknowledgement Clause. This is the end portion where each involved party signs and dates the lease agreement.  This makes it a legally binding contract that can be enforced in a court of law.  If either party does not sign and/or date the agreement, it may be found to be null and void.


Security Deposit Clause

security-deposit-lease-clause-bethesda-md-rentalWhenever you are leasing a rental home, it is a good idea to collect a security deposit from your tenants before they move into your property.

This deposit will protect you from several things including non-payment of rent, damage your tenant causes to your rental property, and any other expenses incurred due to a breach of the signed lease agreement.

It is also a good idea to spell out in your lease agreement the terms surrounding the security deposit so that your tenant is clear about what is required to receive a refund at the end of the lease term.

You should include things such as:

  • The amount collected
  • Terns regarding storage of the deposit (i.e. an escrow account)
  • The interest rate the deposit will collect during the lease term
  • Reasons for deducting from a refund at the end of the lease term
  • The process for returning the deposit

Not sure how to word a detailed security deposit lease clause? 

If you are not relying on a Bethesda property management team to draft you lease agreement, look here for some security deposit lease clause examples.


Security Deposit Acknowledgement Form

In addition to having a security deposit clause built into your lease agreement, you should attach a separate form that will serve as a rider to the original lease agreement.

This rider will acknowledge the receipt of your tenant’s security deposit amount.

Here are some reasons you may want to include this official rider into your lease agreement:

  • Formal acknowledgements serve as proof you collected a security deposit from your tenant and fulfills any state requirement that you notify the tenant in writing of the deposit terms.
  • Acknowledgement also serves as proof that a tenant did indeed provide a sum of money to the landlord to be used as a security deposit.

In Maryland, it is important that you follow the outlined state regulations when it comes to collecting and refunding a security deposit from your tenants.

Your Bethesda property management company will understand the state and local laws and can help you handle this in a legally compliant way.


Lead Paint Disclosure Clause

Lead poisoning is a very scary and serious situation.  And unfortunately, as many Bethesda properties are older, the risk of lead contamination is higher than in some newly renovated areas.

As required by Maryland state law, if your rental home was built before 1978, you must provide any new tenant with lead poisoning education materials and proof that your home has been professionally inspected and certified as being safe and habitable.

In addition, if your home was known to be affected by lead point at one time it is your legal duty to disclose this information to your tenant before they occupy your property and have them acknowledge that they have been properly informed and warned of the dangers that lead-based paint poses.

This can easily be done using a lease agreement rider labeled “Lead Paint Disclosure Statement.”


Pet Policy Clause

bethesda-md-rental-lease-petsBethesda tenants may want to bring their pet, whether that be a dog, a bird, a cat, or even a large hundred gallon fish tank to their new home.

If you prefer to prohibit pets from residing in your rental home, you must outline this in your lease agreement to avoid any trouble later.

If you decide to allow pets, again it must be outlined clearly in your lease agreement so your tenants understand whether they are allowed to have a pet or not.

You should also include any limitations on the pet policy, such as breed exemptions and size requirements, tank restrictions in upstairs locations, and what will happen if any of these terms are violated.

In addition, you should mention outright whether a pet deposit is required, refundable or not, and whether an additional monthly rent fee will be added as a result of having a pet.



Opt-Out Clause

Sometimes you may want to give your tenants the option to legally break the lease agreement and move out prior to the end of the lease term.

Called an “opt-out clause,” this clause will essentially let a tenant break a lease early for an agreed upon fee that must be paid when moving out.

This type of lease clause gives your tenants the assurance that if something happens and they must move, they will be okay so long as they pay the fee.  In addition, this protects you in the case your tenant leaves unexpectedly by covering most of the expenses required for placing a new tenant in your property.

This can also help prevent tenants from just up and leaving when circumstances change, leaving you short on rent and facing the difficult process of finding your tenants and taking them to court.


Final Thoughts

There is a lot that goes into leasing your Bethesda income property.  And, without proper experience in lease agreement drafting, you run the risk of failing to include some of the essential lease clauses that serve as protection to both you and your tenants.

If you have a rental property in Montgomery County and are looking for a quality property management group to help you with matters such as lease agreement drafting, call Bay Management Group.

We are up to date on all rental property federal, state, and local laws and are focused on every detail related to  property management.

The team at Bay Management Group will have every detail you wish to have included, plus those you never knew should be included, placed into your lease agreement so that you have the peace of mind that everything is protected.