Legalities (Part – 1): How to Prepare a Rental Agreement

Legalities (Part – 1): How to Prepare a Rental Agreement


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Here at White Sands Property Solutions, we are approached by up and coming property investors – many of them planning to own income generating real estate. While they focus their attention on buying in areas with higher rental yields, they forget to take into account their legal responsibilities as a landlord. We like to forewarn them about what lay ahead for them on their journey to become a landlord.

One such legal responsibility is a rental agreement. In a survey, we came to know most prospective investors plan to get standard rental agreement from usual sources like internet. What they really don’t understand is the fact that there is no such thing as a standard rental agreement. Depending on the type of property and the type of tenants you are targeting, you will need to prepare customized leases or rental agreements. A customized rental agreement takes into account specific rental policies you want to enforce and the property management laws prevailing in your area.

In the beginning of your career as an investor, we strongly recommend that you work with an experienced real estate lawyer to prepare rental agreements. As your experience and knowledge about management laws grow, you will find that you are able to prepare them on your own.

Most rental agreements or leases have some standard clauses like lease term, security bond amount, rent increase policy etc. Here are some customized clauses for your consideration that many landlords forget to include when they mustn’t:

Naming each occupant separately

Many landlords believe that when a family lives in a unit, only one of the earning members should be named in the lease. It can prove to be a big mistake. You should name each adult occupant separately in the rental agreement. In this way, they make each one of them individually responsible for paying the rent and following all the terms and condition of the agreement.

The occupancy ‘limit’

Your lease should specify how many adults and children can reside in the property. The number should be based on the disclosure about the total number of likely occupants by the tenants in their rental application. You should keep record of their identification, and other necessary documents. This clause becomes a powerful legal tool if a tenant sublets the unit, or moves in friends or relatives without seeking your permission.

Your right to entry for inspection

Your lease should clearly outline how many times you are entitled to conduct a routine inspection of the unit in a specific time period. You should also specify the notice period if you need to enter the unit. The lease should also mention your right of access in case of emergency situations.

What restrictions you need to impose

Many managers don’t specify all the restrictions they want to impose on the tenants in the rental agreement. Instead they rely on the tenant’s verbal promises or assurances. It can be a big mistake. If you want to put in place restrictions with regard to pets, smoking, visitors, parking etc, you should clearly mention terms and conditions in the lease or rental agreement.

Keep in mind that these customized clauses will help you avoid disputes and legal issues.  These tips are for your general consumption. You should approach a licensed lawyer in case you need specific legal advice.

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