How to Use a Standard Lease Agreement to Your Benefit
Whether you're a first-time landlord or a newly minted member of a homeowners' association, it's tempting to default to using a standard lease agreement. Most states issue a standard lease agreement for landlords to use as a guide. The National Association of Realtors and other industry groups have form templates as well.
The standard lease agreement will include the basics: Name and contact information for the lessor and lessee, property address, term of the lease, rental rate, security deposits, etc. These forms are a great reminder of what must be in a valid lease, but that's where they stop. That's why a standard lease agreement should only be used as a guide—not as your final lease agreement. Instead, refer to a standard lease agreement as a starting point, and build off of it from there.
There are a number of additional lease clauses that you can leverage to protect you as a property owner or manager. Here are five suggested lease clauses that you should consider including.
5 Smart Lease Clauses to Add ASAP
This is one of the most important lease clauses. Basically, this clause states that if one part of the lease is deemed to be illegal for some reason, the rest of the contract is still legally binding.
Decide whether you're comfortable with residents subleasing the apartment, and if so, under which conditions. Be sure to detail those as part of the initial contract (e.g. screening process for new resident, inclusion on new lease, one-time fees associated with sublease). Don't wait until the resident contacts you to tell you they've already moved out and subleased the unit to someone else—at that point, you have little recourse.
- Joint & Several Liability
This is one of the more common lease clauses, particularly with leases involving roommates. Essentially, it means that each party to the lease is jointly and individually responsible for fulfilling the contract. This allows you to go after all residents in the event of default, and prevents roommates from finger-pointing and trying to blame each other. For example, even if just one person is responsible for damages, all are held liable. This encourages roommates to resolve issues amongst each other so they don't get stuck footing the bill.
Detail how the lease will be automatically renewed, if at all. Some lease clauses require the landlord and/or residents to give at least 60 days' notice if they don't plan to renew the lease at the end of its term. However, some don't. This clause can also be used to add an escalator (percent increase) that the lease will go up upon renewal (e.g. 2% per year). Including the escalator helps residents to anticipate rent increases so they aren't caught off-guard.
- Use of Premises
This clause details who can use the unit (e.g. only the residents listed on the initial lease) and for which purposes. The language might stipulate that any person staying in the property for more than 2 weeks in any 6-month period will be considered a tenant, rather than a guest, and that the landlord reserves the right to add that person to the lease agreement. Also, be clear about whether the unit is to be used solely for residential purposes, or whether it can be used for short-term stays (e.g. Airbnb) or commercial uses (e.g. resident who bakes goods to sell at a local farmers' market). Be sure to check local regulations, as there might be laws regarding how residential units in specific zones can be used.
It's always worth having a lawyer prepare an initial lease agreement for you. It might cost a few hundred dollars, but it will be well worth it in the long run. That lease will be tailored to your specific property and circumstances, and it can be used for years to come.