Points to Consider for the Rental Agreement Part 2

Additional Issues to Cover in Your Rental Contract

Occupancy - The contract needs to specify that the premises will be used as a residence with a specified number of adults and children. The premises will be used for no other purpose without written permission by the owner. Having any guest staying more than 14 days will be considered a reach of the agreement unless the resident tenant recieves written consent from the landlord. I also don’t allow them to use the premises for a home business without my permission. A lot of people have home-based businesses, and that’s not a concern except if they have customers coming in and out of the home, which creates a potential liability issue. So check with your tenant to see what kind of home-based business they will have.



Pets - I make sure that they sign an agreement with me about having pets on the premises. I need to know, for example, if they have pit bulls or any other potentially dangerous animals on the property. It doesn’t matter to me if they do have pets, and in fact almost all of my tenants have pets – I just need to know about it.



Entry and Inspection - This gives you the right to enter the property at reasonable times and with reasonable notice to inspect the premises. It’s not that you are inspecting their personal lives but that you want to make sure the home and property, which do not yet legally belong to the tenant, are maintained in accordance with the rental agreement. You also may want to show the home to prospective new tenants or buyers. If the tenant decides not to exercise, you want to have the right to affix “for sale” signs on the front lawn, but you shouldn’t even step onto the lawn without calling the tenant first. This is violating their rights to peaceful enjoyment.



Assignment and Subletting - I do not let my tenants sublet or rent any portion of the premises without my prior consent. The subletter’s name is not on the rental agreement.



Joint and Several Liability - Anyone who signs the contract is 100 percent responsible for all the points within the contract up to the total amount due. I had three men who signed the agreement and all three split later. I was only able to find one of them and I told him he was 100 percent responsible for one-third, but this inclusion of joint and several liability protects the landlord from having to find all the tenants. If one can be found, that one is 100 percent responsible.



Maintenance, Repairs, and Alterations - It is the tenant’s responsibility at all times to maintain the residence and property in a clean and sanitary manner including fixtures, equipment, appliances, furniture, and all other furnishings. If they should choose not to exercise the option, the residence should be left in the same condition as originally rented, normal wear and tear excepted. Residents are responsible for changing the furnace filters and the batteries in the smoke detectors on a regular basis. Residents should be responsible for the maintenance of the property and the house costs. The tenant cannot make major changes to the structure until he owns the property. I had one resident who tore off an upper decking because he decided he didn’t want it, and I had to pay for it and then rebill him because I didn’t own that house. The resident also cannot paint, hang wallpaper, or make any other changes without my consent. I had one tenant who repainted the inside of the home navy blue, and then left after two months. I had to sue to recoup my costs for repainting the home. Residents must also be responsible for the cleaning of sewers and drains that have become blocked due to their negligence in keeping them cleaned.

If the resident damages any windows or doors, it is their responsibilty to replace those items immediately. If the resident hsn’t reparied the items within seven days, I will replace the items and charge the residents for the repairs, and these costs will be due immediately. I tell my tenants that any repair under $10 must be reported to me and any repair over $10 must be approved in writing. In other words, they don’t have an open checkbook to make any repairs they want. Make sure your tenant also doesn’t run off and do repairs and then bill you for them, such as “My furnace went out and I paid the guy $200 to fix it.” My furnace company might only charge $100. Also, the tenant may then try to take that repair bill and apply it against their rent. Make it very clear to the tenant that no repairs can be made without your consent if the repairs are over $10.



Appliances - One of the things I list on the contract is all the appliances already in the home. I make it clear to the tenant that all the appliances in the home are there for my convenience- in other words, they belong to me. If, therefore, one of the appliances stops working and they dispose of it without telling me and then leave the home with that appliance missing, I will bill them for it. If they want to remove the appliance, I have to agree to it and I will cross it off their rental agreement with my initials and the date.



Ordinances and Statutes - The tenant must abide by local zoning laws for usage of the property. For example, they can’t run a day care business at the home if it isn’t zoned that way (not to mention the excessive liability that would incur). A home-based business of web site design, however, violates no zoning laws anywhere in the country. You have the right, as the landlord, to evict immediately for any illegal operations on the premises- for example, druge usage or manufacturing.



Liability of the Tenant - The resident is responsible for any personal injury or property damage caused by the resident or tenant or the tenant’s visitors. The tenant is also responsible for damage due to negligence in caring for the property. If there is a fire, however, and all the tenant’s property is lost, the owner is not responsible to pay for that since the tenant carries his own renter’s insurance for just such an event. The tenant must keep all the sidewalks clear and clean, all access to the home free and clear, and should maintain the outside premises to be a safe enviroment.



Insurance Coverage - Because the owner’s policy does not cover the belongings of the tenant, the owner requires the tenant to carry their own insurance against the risk of damage to their personal property. This insurance must be in place before the tenant moves in.



Defaults—Landlord Remedies - Let the tenant know that failure to comply with even one part of the agreement will constitute a default of the entire agreement. This means that the owner can immediately repossess the property.



Attorney Fees - In the event that either party has to take legal action to enforce the terms of the contract, the owner will be allowed to recoup all attorney fees permitted by law.



Security Deposit Act - Make sure that the Security Deposit Act (SDA) of your own state is in your rental contract. The SDA varies by state, and you must know what the rules are for your state. You are the one providing the contract, so you are responsibly for that information.



Notices - Any notices must be in writing for your own protection, and not verbal. Notices should be sent to the residence address. If the tenant is sending you a notice, it should be sent to the address specified in the contract ( either office or post office box).



Waiver - Failure of the owner to enforce any part of the contract will not constitute a waiver of the contract. For example, if I waive the late fee one month, that doesn’t negate my right to enforce it the next month.



Holding Over - The tenant must give a 30-day written notice of intent to vacate the property.



Additional Terms and Conditions - Some further things you may want to add to your contract include:

• Vehicle limit.

• No motorcycles (some can violate the city noise ordinance).

• No working on the car on the premises. All repair work is to be done off site.

• No permanent stickers on the bathtub, and only nonabrasive cleaners to be used on the tub.

• No carpet cleaners will be used without landlord permission. The reason for this is that some of the over-the-counter cleaning solutions can actually bleach the carpet and leave a white spot.



Make Sure Your Tenants Read and Understand the Agreement

It is very important that you go through the contract line by line with the tenant so that they have heard everything out loud and are fully responsible for the contents when they sign their name. Don’t skip over any points of your contract, even if they begin to fidget because it takes awhile. You might also ask after each point, “Do you have any questions about that?” If they want to take the contract with them, then that is okay also.





Excerpt taken from Investing in Real Estate with Lease Options and “Subject-To” Deals, Chapter 13, Pages 187-191.



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