Although every lease is different, there are certain policies every landlord should address.
Regardless of the specifics that you decide, it’s important to clearly state all of your policies in your rental agreement contract ahead of time.
With that, here are five policies you should include in your lease agreement:
- Security Deposit
A security deposit guarantees you compensation in the event of property damage or unpaid rent at the end of a tenant’s term. In your lease, you should state the amount of your security deposit, how and when your tenant needs to pay it, when you’ll return it, and in what circumstances you’ll keep the deposit.
Security deposit policies are largely determined by state legislation. Many states set maximum amounts you can charge for security deposits, and you’re also required to return the security deposit within a set timeframe, ranging from 14 to 60 days after the end of the lease contract. Some states have more specific laws governing where you must keep the deposit and documents you must provide for the tenants, so be sure to research your state’s legislation before you finalize your policies.
- Late Fees
One of your most important policies for your lease is your rent policy. Your business will suffer if your tenants don’t pay rent on time, so it’s crucial to strictly enforce late rental fees as incentive.
Not only should your lease agreement state the late fee amount, but it should also address grace periods. Because some people don’t get paid until the first of the month, and because funds sometimes take multiple days to transfer, a grace period provides a few days after the rent due date where a tenant can pay rent without being penalized.
Like security deposits, late fees and grace periods are regulated by state legislation, so be sure to do your research.
- Pet Fees/Rent
Ninety percent of renters own pets, according to a survey conducted by Apartments.com. This means that by not allowing pets in your units, you’re greatly limiting your pool of renters.
It’s no secret that pets pose an added liability to your property. With that said, charging pet fees or pet rent is a great way to offset the potential damage that pets might cause. A pet fee is a one-time, non-refundable fee, usually between $50 and $500, that a tenant pays before moving in with a pet. Pet rent, on the other hand, is a monthly fee, usually between $10 and $60, which a tenant pays every month on top of their rent.
Subleasing happens when your tenant moves out early or temporarily and wants to find another tenant to take over their lease. Subleasing can be very beneficial for you because it eliminates an unwanted vacancy, and it moves the responsibility of finding a new tenant from you to your tenant.
However, you want to set clear parameters regarding subleasing ahead of time in your lease agreement, because the last thing you want is to get stuck with a bad subtenant. Some good subleasing policies to consider are as follows:
- Require your consent to sublease
- Run a full tenant screening on the subtenant
- Have final say on the subtenant
- Require the subtenant to pay rent directly to you (so your original tenant doesn’t profit from the arrangement)
- Renters Insurance
Requiring renters insurance is a good policy that helps protect both your tenants and yourself.
If your property experiences damage from a storm, fire, accident, or break-in, your landlord insurance will cover your property and belongings, but it won’t cover your tenant’s belongings. If tenants want coverage in such instances, they’ll need a renters insurance plan.
As a landlord, it’s a good idea to require your tenants to purchase renters insurance before moving in because if something were to happen, a tenant would be less likely to hold you responsible if their losses are covered. Furthermore, your tenant’s renters insurance will generally kick in before landlord insurance, which means there’s a less likely chance you’ll have to interact with your own insurance company, saving you some hassle.
Having solid policies outlined in your lease agreement is essential if you want to save yourself from problems with your tenants down the road.
When drafting your lease, make sure to consider the five policies discussed in this article. Also, be sure to review your state’s legislation before making final decisions on your rental policies.