The Lease Agreement Deconstructed

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If you have ever leased an apartment or home, you will likely be familiar with the lease agreement that was signed by both you and the landlord.

Yet, have you ever thought about the actual components that make up a lease agreement?

If you have not, and are thinking about using your Harford County home as a rental property in the near future, maybe you should start.

Drafting a solid lease agreement, even if completed by your Bel Air property management company, is a crucial step when it comes to leasing out your rental property.  It outlines important information, defines each party’s responsibilities, and becomes a legally binding document that can be relied upon if a landlord-tenant dispute ever arises.

Today we break down a traditional lease agreement into its most basic parts so that you will know what must be included should you decide to enter the rental property business.

Making sure that each of the following elements is clearly defined in your rental agreements will ensure that your lease agreement in legally compliant, that everyone is on the same page, and will hopefully prevent any problems from popping up unexpectedly after your tenant takes up occupancy in your Bel Air home.

 

The Main Elements in a Lease Agreement

Though every lease agreement that you draft will differ depending on the property, it is important to understand the basic framework that makes a lease agreement a legally binding contract.  This is why many landlords hire a high-quality property manager in Bel Air to handle all aspects of their income properties, including drafting lease agreements.

Having a team of experts knowledgeable about state and local laws related to your income property is the best way to protect both you personally and your rental business.

 

Tenant Names

Include the legal first and last names of all tenants that will be residing in your Bel Air rental property.  These tenants will be held accountable for the terms outlined in the lease agreement, including but not limited to, rent payment, property maintenance, and damages incurred.

This section should also include your legal name and your Bel Air property management company, if applicable.  This way, it is clear from the start who the contract binds together and which parties are involved.

 

Lease Term

It is important to include the length of time you would like the lease to be valid.  In other words, how long the tenant is allowed to occupy your property before a new lease agreement must be agreed upon. 

You should determine a start date (commencement date) and an end date (expiration date) so that both you and your tenants clearly understand when the occupancy of your property will begin and end.

It is not unusual to have your tenants agree to a one year lease.  This allows for a consistent supplemental income to flow into your bank account, while also allowing you to raise the monthly rent amount fairly easily after the year is up.

This section is also a good place to include basic identifying info about your Bel Air property including its official name, if it has one, as well as its full address including any unit numbers.

Don’t forget to add the city, state, and zip code either.  Although this may sound obvious, you want to be as thorough as possible to avoid any potential confusion.

 

Payment of Rent

collect-rent-tips-property-manager-harford-county-mdIt should already be agreed upon between you and your tenant how much the monthly rent will be.  However, you must also include this in writing in the signed lease agreement.  Include things such as:

  • The total amount of rent due
  • The exact date the rent is due (g. the first of every month)
  • The forms of payment accepted and how to make said rent payments
  • Where rent should be delivered if applicable
  • The consequences for a late or non-payment of rent

Having all of these details in your lease agreement will ensure you that your tenant has willingly acknowledged and understood their financial obligations.

It also protects you in the event that you have to evict your tenant for non-payment.

 

Deposit Amounts

If you are collecting any type of deposits from your tenant up front, you should outline this in the lease agreement.  This way at the end of the lease term, when most people forget how much they paid and when, it can easily be referred to in the signed agreement.

Deposits can include things such as:

If you do collect a security deposit, which is advisable, make sure you understand your state and local laws regarding that money so that you don’t land yourself in trouble later on.

 

Fees, Fines, and Charges

There should be a section in your drafted lease agreement that will detail any potential fees or fines the tenant may face.  For example:

  • Late rent charges
  • Bounced check fees
  • City fines
  • HOA fees and fines
  • Attorney and court fees

 

Tenant Responsibilities

Oftentimes a tenant is unaware of basic maintenance or utility duties they are responsible for.  And while providing your tenants with a tenant manual at the beginning of the lease term is definitely helpful, it is important that serious matters be included in the lease agreement too.

If you are paying for the properties water, sewer, and trash bill make sure that is included.

If you want your tenant to maintain the backyard pool maintenance, include that.

If you are prohibiting certain types of alterations to the property (such as painting the walls), you guessed it, include it.  This way, your tenant can never claim they didn’t know.

It is also important to add how a tenant can call in a maintenance request or repair.  After all, this is your Bel Air investment property.

The last thing you want is a tenant who has a pressing issue with your home’s plumbing and no way of contacting either you or your Bel Air property manager.

Include the process for making a maintenance request and include phone numbers that can directly connect your tenant with someone that can help.

 

Property Access Expectations

harford-county-property-manager-talking-tenant

Here, you can outline when your tenant can expect you to enter the premises (with proper notice of course).  This can be for inspections, to check on repair statuses, or even to show a rental property that is on the market to potential buyers.

Make sure you include what kind of notice will be given and what will happen if there is no response to said notices.

While you may not enter the premises whenever you want, especially with the intent to harass your tenant, your tenants are also prohibited from changing the locks on your property, denying you access.

 

Use of the Property

While most people have a general understanding that breaking the law is well, illegal, it is a good idea to state the intended use of your property as it applies to your tenants.

This may include provisions such as:

  • The property is to be used as a residence.
  • There is a limit on who can stay in the residence and for how long.
  • No business can operate out of the property.
  • No illegal activities will be permitted.
  • Peaceful enjoyment of the other tenants and neighbors is required.

In this section, add in the potential consequences for breaking the rules.

 

The Signatures

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After the lease has been drafted, discussed, and agreed upon by both parties, make sure everyone on the lease agreement signs their name.  This proves everyone is in agreeance and confirms that a formal understanding of the terms and conditions of the lease agreement has been met.

 

Final Thoughts

Leasing your Harford County rental property starts with a solid lease agreement and high quality tenants.  These two things will often lead the way, whether positive or negative, for the kind of lease term you and your tenants will experience.

If you are interested in hiring a property manager and have a rental home in the Bel Air area, contact Bay Management Group to help you.

Not only will we handle all things property management related throughout the lease term, we will also get you started on the right foot from the get-go with a thorough and legally compliant lease agreement.

Contact us today and see how we can help you draft your lease agreement, place quality tenants in your Bel Air home, and manage everything else that comes next, so you can have the peace of mind that you and your property are protected.

 


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.