A lease agreement is a binding contract between a property owner and a tenant. It outlines the rules and responsibilities of both parties. This document is also referred to when deciding how a certain situation should be handled.
It’s essential that the lease includes specific and detailed information customized to your own Florida property. The policies must be clearly outlined because the clearer the lease, the less confusion occurs.
At REMAX Infinity Property Management, we believe that these are the most important things you should include in your lease agreement.
5 Essentials to Include in your Lease Agreement
1. Lease Term
As a property owner, it is important that you state a definite lease term so that tenants don’t overstay in your property. Establishing a lease term will ensure both parties know the expected duration of the stay.
A lease term is dependent on the type of property you own. For instance, most vacation rentals will have shorter leasing terms than single-family homes. With vacation rentals, people may rent for only a few weeks. Though, with single-family homes, tenants will typically rent for at least a year.
2. Early Termination of Lease
When a tenant signs the leasing agreement, most property owners would expect them to abide by it. However, as the famous saying goes, “even the best laid plans can go awry.” Situations can occur that make your tenant want to terminate the lease early such as changing jobs, getting married or getting divorced. Although these situations don’t constitute as legal grounds for terminating a lease, they are the usual reasons.
That said, there are legal reasons for breach of contract. It’s best to always include a clause for an early termination of lease.
You can consider the following questions:
- If the tenant terminates the lease, but considers subletting the rental unit to prevent your income loss, will you agree?
- Who will shoulder the marketing fees to advertise the vacant property?
- Should a tenant be obliged to pay the remaining rent until the tenancy ends, or only until a new tenant is found?
3. Rent Rate
Rent must be included in the leasing agreement to prevent any confusion between you and the tenant. Be clear on the rent rate so a tenant knows how much to budget for the monthly payment.
Even more importantly, rent should be highlighted if a tenant renews the lease and you increase the cost of rent.
Also, if you choose to give your tenant a rent discount, you must specify the date in which the tenant must start paying the regular rent again.
4. Rent Collection
So, the rent rate is clear, but you must also set in place rent collection guidelines. Firmly state the date for rent collection. This will prevent the tenant from postponing his payments. Most property owners choose to collect rent on the 1st of the month because it’s easy to remember. Also, if you have several rental properties, having an easy due date for rent collection avoids confusion.
You must also specify the acceptable methods of payment. Here are a few options:
- Interact e-transfer
- Debit or credit card
- Pre-authorized bank withdrawals
- Post-dated cheques
Here are some questions to consider that can help make the lease clearer:
- If a tenant moves into your property mid-month, when is his rent due?
- How can a tenant pay their rent?
- If a tenant can’t pay on the due date, will you offer a grace period? If so, how long would it be?
The more specific your conditions are, the more efficient your rent collection will be. Considering several scenarios and having well-thought out solutions are key to being successful.
5. Late Fee Penalties
Sometimes a tenant may have a financial emergency, or may experience an unforeseen circumstance that impacts his income. This may cause a tenant to pay his rent late. It’s important for you, as a property owner, to consider how you will handle this type of situation.
You can either:
- Give the tenant a grace period
- Impose late fee penalties
- Do both: Give the tenant a grace period with late fee penalties
Whatever you choose, make sure it is covered in detail in the leasing agreement. The tenant must know how much additional payment will be added to his monthly rent as penalty for paying late.
When arranging for penalty fees, consider these questions:
- Will you practice a flat fee charging or daily fee charging? Specify each amount.
- If you decide to practice a percentage payment of the monthly rent, how much would it be?
You don’t want to charge too much. This can become heavy for a tenant who is experiencing temporary financial setback. You also don’t want to charge too little, though, because then a tenant might take advantage of paying late since he can afford it.
These are 5 important things you should definitely include in your leasing agreement. As a property owner, you want to make sure you have control over certain scenarios that can cause you financial loss. So, it’s best to be as specific as possible in the leasing agreement.