05 Feb Lease Provisions to Include in your Residential Lease
by Craig Galanter with editor Maxwell Bridge
Owning investment real estate properties are a great way to build wealth as the return on investment can be extremely high. Acquiring rental properties is not cheap though so it is imperative that you take certain steps to safeguard your investment. One of the most important ways to protect yourself and your investment is by having an ironclad residential lease. Here, we will discuss some lease provisions that need to be included in your residential lease.
Once a lease is signed by both parties it becomes a binding contract. Simply put, a lease is a contract outlining the terms under which one party agrees to rent property owned by another party for a specified period of time. Drafting a lease should not be taken lightly as having a wrong provision can be detrimental. Below, are some provisions which should be standard in a residential lease agreement.
- Parties to the Lease: Every person living in the residence, including minors, should be listed on the lease. Any person over 18 years old must sign the lease. This ensures every adult living in the residence is liable for rent should one tenant not pay.
- Rent and Term: It is important to specify the monthly rent, when it is due, how it is to be paid (check, electronic deposit, etc…) duration of the lease (when it begins and when it ends), penalty for late payment, and how it can be renewed/terminated.
- Security/Damage Deposit: Make this section as crystal clear as possible as this is a highly contested area of the lease. You need to provide how much the security deposit is and when/how it will be returned. Colorado law has a 30-day limit to return the security deposit unless the lease specifically notes different (60-day max). Also, this provision should include that any deductions will be accompanied with a written statement (I like to include photos as well). Lastly, it is important to note whether any part of the security deposit is non-refundable for pets.
- Assignment/Subletting: You must determine whether you want others that are not a party to the lease to rent rooms/entire residence of your rental property.
- Alterations/Improvements: This provision should make clear whether a tenant can make changes to the property. If you are willing to allow a tenant to make changes/improvements on the property, we strongly suggest doing so by written agreement (EX: painting walls).
- Utilities: This provision should specifically state which party pays for utilities.
- Maintenance and Repair; Rules: Make sure that the tenant is responsible for keeping the property in good and sanitary conditions and that if repairs need to be made tenant agrees to contact landlord. Other items that can go in this provision are keeping kitchen and bathroom cabinet doors open during very cold weather and allow water to drip from the faucets to prevent the pipes from freezing.
- Emergency Access: This allows the landlord to enter the premises without notice should there be an emergency (EX: pipe bursting).
- Pets: If you are willing to allow pets in the residence you need to decide whether an additional pet security deposit will be required and whether it will be refundable or non-refundable. Additionally, you can charge a monthly pet fee. You should also include how many pets are allowed on the property and any other rules you deem necessary (pets on leash, cleaning up pet waste).
- Indemnification: This is a very important provision. This is where the tenant agrees to reimburse the landlord, or pay directly, “all losses, claims, suits, liability and expenses,” related to a liability situation.
- Smoking: You can prohibit smoking of any kind or allow a smoking designated area if you do not want smoking in your residence.
This is just a small sample of some important lease provisions we recommend having in your residential lease. The information discussed above is not an exhaustive list of items to consider when drafting a residential lease. Having an experienced real estate attorney draft your custom lease is a worthy investment as it can save you possible litigation and money down the line. You may contact the experienced attorneys at Kearney, McWilliams & Davis to get started on your residential lease.