Whether it is your first investment property, or your tenth, utilizing a lease or rental agreement for your tenants will help save you headaches in the long run. Unfortunately, some landlords don’t use written contracts. They have a conversation with their tenant, take the tenant’s check, and let them move in. While verbal promises can be legally binding, it can be difficult, if not impossible, to prove them to a judge if problems arise. Don’t take a chance. Use a complete rental agreement or lease provided by an attorney.
Here are some other important reasons to use a written agreement.
Avoid Landlord-Tenant Disputes
A landlord who provides no written lease or rental agreement often finds that the result is chaos. With no clear agreement written down, every minor disagreement (like home repairs, the fee for a late check, or deductions made from a departing tenant’s security deposit) can escalate into a potentially lengthy legal battle. Contracts will help outline all of these issues.
Clarify Your Important Issues
In addition to heading off disputes, a good agreement nudges the landlord to address important issues that might otherwise be overlooked before getting into a contract. For example, a no-smoking policy might be a deal-breaker for a tenant who smokes. Or, if you do not want pets in your home, it may make it more complicated for a person with a dog to move in. So putting all the critical terms about the rental in writing that the tenant can review (and potentially walk away from) leads to happier tenants, satisfied landlords, and fewer legal troubles down the road.
Comply With the State & Local Law
Many state and local laws require rental or lease arrangements intended to last longer than a year to be in writing, with both parties signing the agreement. Also, state landlord-tenant laws might require landlords to make certain disclosures to tenants in a lease or rental agreement or impose other duties relating to tenancies related to the home. Whether in MA or CT, review your state and city laws regarding rental contracts.
Ensure Your Right to Collect and Use a Security Deposit
A significant factor that landlords need to ensure is in the contracts is Security Deposits. Without a written agreement, you risk not being able to collect or use a security deposit to cover unpaid rent or damage repair costs if not written into your agreement. If your arrangement isn’t in writing, a battle over a security deposit becomes a he-said-she-said battle, and the courts often decide such matters by giving the renter the benefit of the doubt.
So, what kind of contract should you use as a landlord? Both leases and rental agreements have pros and cons—which is right for your business depends on several factors.
Rental Agreement
A rental agreement establishes a tenancy for a short period of time, usually for just one month. A month-to-month rental agreement is automatically renewed each month unless you or your tenant provide the proper notice to terminate, typically a 30 days notice. As the landlord, you may increase the rent, change other tenancy terms, or terminate the lease on relatively short notice unless a rent control ordinance or law specifies otherwise.
Lease
A lease obligates you and the tenant for a set period, usually a year. As the landlord, you can’t raise the cost of the rent or change other terms until the lease runs out unless the lease itself provides for modifications or the tenant agrees in writing to the changes. You also can’t ask the tenant to move out or start an eviction lawsuit unless the tenant fails to pay the rent or violates another lease term or state or local law. You can either renew, decline, or negotiate to sign a new lease agreement at the end of the current lease term.
Create a contract to attract the tenants you want, whether a short-term or long-term agreement. Contracts keep the tenant paying rent, following the rules agreed upon with the landlord, and accepting responsibility for any damage to the apartment that is more than just “normal wear and tears.” The landlord must provide an apartment that is safe, clean, and in compliance with the Massachusetts Sanitary Code and keep any promises in the lease or rental agreement. If you have questions on any landlord-tenant contracts, contact us today.