If you’re a new landlord, one of the first things you need to ask yourself is what to include in your lease agreement. This is the most critical stage of the rental process because it will specifically outline your expectations and obligations as well as the expectations and obligations of the tenant. As the basis for your agreement, it is incumbent upon you to ensure that the agreement addresses any potential concerns which may arise.
What to Include in Your Lease Agreement
Names & Limits on Occupancy
Your rental agreement should list the names of all tenants over 18 years of age, and each tenant should sign the agreement (this applies even if the tenant over 18 years of age and lives with his/her parents).
The language of the agreement should state that only the individuals on the agreement are permitted to live at the residence. Any change in residency, such as move-outs or move-ins, must require notification and approval from the landlord. In the event that your tenant wants to add an individual to the lease during the tenancy, be sure to request a completed application and have the new tenant sign the existing lease.
Term of Tenancy
Make clear the length of your rental agreement, whether the agreement is on a month-to-month basis or a fixed term lease. Include conditions for early termination such as a 'buy-out fee' or take-over policy.Instructions for Paying Rent
Be sure to include detailed instructions about how the tenant can pay rent. This should include the amount of the rent, the due date, and the grace period (if any). Be clear about the acceptable forms of payment (check, direct deposit, online) and the location(s) payments can be made (your office, an onsite drop box, your mailing address, ect). Also include any penalty fees, such as late fees and bounced check fees.Deposits and Other Fees
Specify the total amount of the security deposit. Also include an explanation of how you may use the deposit (i.e. repairs after move-out) as well as when and how the deposit will be returned. If there are any non-refundable fees (such as background or credit checks), these should also be detailed.Repairs and Maintenance
Make clear that the tenant is liable for cleanliness and damages caused by abuse or neglect. The tenant should also know how to report any dangerous or defective conditions, as well as the procedures for filing complaints and initiating repair requests. Include any restriction you deem necessary regarding tenant repairs and alterations.
Pets Policy and Fees
Policy: It's important to draft a detailed pet policy. Include types of animal allowed (and/or prohibited), number of pets permitted, size restrictions, and assurances to clean up all pet waste. A detailed pet policy will save you from extreme headaches when your tenants attempt to bring unauthorized animals on your property.
Also include the amount of the pet deposit and/or additional rent charged in the lease agreement. Some property owners charge a monthly non-refundable "pet rent," while others charge an additional security deposit. If a portion of the security deposit is non-refundable, be sure to state so in the lease agreement.
Common Areas & Parking
If there are any known defects to the premises which may endanger the tenant's health, the landlord is obligated to disclose them. Failure to disclose concealed defects may result in legal action, particularly if this leads to injury. Ideally, these defects should be addressed before the tenant moves in.
Also include the following disclosures required by the State of California:
- Lead Warning Statement for housing built prior to 1978 (required by 24 Code of Federal Regulations Section 35.92).
- Megan's Law Notice (Civil Code Section 2079.10a)
Include a sublease clause forbidding (or requiring written permission before) subletting the residence to another tenant. We recommend that you do not allow subleasing, but instead require the tenants to sign a new lease agreement. This enables you to do a background check on the new tenant and protects you from liability in case the new tenant becomes a problem.Termination
Be sure to clearly outline the lease termination requirements. This section should explain the steps the tenant must take to terminate the lease agreement, including the number of days notice you require (60 to 30 days written notice is typical). Also include any "hold over" fees; this will protect you in the event the tenant does not vacate the premises on time (for example, you can state that if the tenant does not vacate the premises on the agreed date, the rent will be charged at 2 times the regular rent rate).After The Tenant Leaves
Once the tenant vacates the property, you have 21 calendar days to send the tenant an itemized statement of charges and their security deposit refund. For an explanation of security deposit refund requirements, visit the Department of Consumer Affairs website.