As we take on the management of new rental properties, I have many opportunities to review the existing leases in place. I am amazed at how many of these leases are missing necessary pieces and how many are just plain horrible. Here are some examples of things I have seen:
- No partial payment clause-This a subtle, but important clause that allows you to accept partial rent from a tenant, but not lose your rights to still file an eviction. I had one owner where the tenant would pay about 50% of their rent on the first of the month, but then not pay the remainder until the 20th. Because their lease did not have the No Partial Payment clause, they had no recourse to evict this tenant. Only option was to refuse the partial payment and then file.
- No written details of who was responsible for lawn care and snow removal-The tenant and landlord had a verbal agreement that the tenant was responsible for both. When the relationship went sour, the tenant stopped taking care of the items and the landlord was powerless to resolve this issue.
- Old late fee amounts-About 4 years ago, Minnesota changed the laws to cap the maximum late fees at 8% of outstanding rent. I still see owners that are charging a flat fee or even daily fee, which if applied in some circumstances could be illegal (if you charged a $25 late fee on a $150 outstanding rent, this would be over 8%).
- Lease language that was not applicable to Minnesota-I have seen a couple of internet leases that are clearly from Texas or Arizona. They use real estate terms that are not common here or even refer to statutes that are not from Minnesota.
So where is a landlord supposed to find a good rental property lease? Well, downloading a lease off the internet is not where I would start! When I first started out as a landlord in the rental property business, I used a decent lease from Minnesota Multi-Housing Association. While this is a fairly simple lease, it does have all the necessary pieces to make you successful and keep you out of trouble. Click here for their lease. Alternatively, if you can only find one on the internet, spend $200-300 to have it reviewed by an attorney. Then read and reread your lease.
We actually review and modify our lease on an annual basis. This allows us to incorporate changes in our business, our tenant base and tighten up any areas that may have caused confusion or frustration during the previous year. A big change that I made in 2017 was to move the most important details (rent, move in, late fees, move out, etc) to page 1, thereby making it easier to find this info. Here are some of our 2018 lease changes:
- Added no winter move-out to prevent having vacant houses during the winter and having to lease in winter
- Improved language around no auto repairs on the property or in the street near the property-prevents someone from running an auto repair shop in their garage (lesson learned in 2017)
- Added vaping in the no smoking section of the lease-you’d be surprised how many people don’t consider this smoking (but the house still smells after a heavy vapor’er)
- Changed language to refer to property instead of unit or apartment (since we lease all types)
- Moved paragraph about exterior maintenance forward in lease and moved “is /is not required to perform” check boxes into that paragraph
- Improved language around tenants utilities and tenants maintaining working utilities
- Tweaked our “House Rules”. Added some, combined others, removed old items (waterbeds)
- Reworked (for 2nd year in a row) details about pest control and who is responsible for it (tenant or owner)
So even after using the same base lease for 5 years, we are still improving and modifying it. Like most documents, it has grown to 10 pages. I don’t love having to print that many pages, but it is necessary to insure both tenant and landlord are on the same page.