When you’re a landlord, there’s nothing more important than having a smooth and successful lease-signing process. After all, the lease is what lays out the foundation of your relationship with your tenant – so it’s crucial to get it right.
This post will walk you through the 7 key steps of a successful lease signing process.
1. Set the foundation of the landlord-tenant relationship
A well-written lease sets forth the expectations and responsibilities of both parties and provides a clear road map for resolving disputes.
Landlords and renters can quickly find themselves at loggerheads without a clear lease, with each side feeling mistreated or wronged. A well-crafted lease should therefore be the starting point for any landlord-tenant relationship. By clearly laying out the rights and responsibilities of both parties, a well-written lease can help to prevent misunderstandings and conflict.
In addition, a lease can provide a helpful reference point if a dispute arises by clearly outlining the terms of the relationship.
2. Write a good lease
A lease is a contract between a landlord and tenant that outlines the terms of their agreement and generally must be in writing to be enforceable. The lease should be clear and concise so both parties understand their rights and responsibilities.
Here are tips to follow when writing a lease:
Know your state laws
Every state has different laws governing landlords and tenants. Familiarize yourself with the laws in your state before drafting a lease.
Choose the correct type of lease
There are 2 main types of leases: fixed-term and month-to-month. A fixed-term lease is for a specific period of time, typically one year. A month-to-month lease gives the tenant the flexibility to move out with 30 days’ notice.
Draft the lease in plain language
The lease should be written in simple, easy-to-understand language. Avoid using legal jargon or terms that may confuse the average person.
Include all relevant information
Include all pertinent information in the lease, such as the names of the landlord and tenant, the rental property address, the term of the lease, rent amount and due date, security deposit amount, and rules and regulations.
Keep a copy of the signed lease
Once the lease is signed, keep a copy in a safe place and give a copy to your tenant. Doing so will come in handy if there are ever any disputes down the road.
3. Be upfront about your expectations for the property
One of the most important aspects of being a property owner is setting clear rules and expectations for your tenants. This may ensure that both parties are on the same page from the start and can help you avoid potential conflicts or misunderstandings.
If a tenant is unclear about what is expected of them, they may inadvertently violate one of your rules. This could result in damage to the property or a dispute between you and the tenant. By being clear about your expectations from the outset, you can avoid potential problems.
4. Review the lease with your tenants before they sign it
Reviewing the rental agreement with your tenants gives you a chance to review all the important details and ensure they understand everything in the lease. It also gives you an opportunity to answer questions. In addition, reviewing the lease together gives you an opportunity to build rapport with your tenants and establish a good relationship.
There are a few best practices you can follow to make sure the tenant understands everything in the rental lease:
- Explain all the key points in plain language.
- Go over each page and point out any important sections.
- Give the tenant time to read through the entire lease and ask questions before giving their signature.
5. Collect a security deposit before signing the lease
A security deposit is a sum of money—usually one month’s rent—that a landlord collects from a tenant at the beginning of a tenancy. The purpose of the security deposit is to protect the landlord in case the tenant damages the property or fails to pay rent.
The best practice for keeping security deposits is to put them into a separate account, and many states prohibit landlords from commingling a security deposit with other funds. You should also keep good records of any damage to the property so that you can deduct the cost from the security deposit when the tenant moves out, while carefully adhering to any laws related to the handling of security deposits.
Local and state laws vary on the amount of security deposit a landlord can require and what it can be used for. In some states, there is a maximum amount (usually one or 2 months’ rent) that a landlord can collect. In other states, there is no limit. Check your local laws before collecting a security deposit from your tenant.
6. Transfer all utility bills to the tenant’s name
Make sure that all utilities a tenant is responsible for are transferred into the tenant’s name at the start of the lease. This ensures that the tenant is responsible for paying the bills and can deter any confusion.
In single-family rental (SFR) homes, tenants are generally responsible for paying their own utilities directly. On the other hand, multifamily properties sometimes have a master-metered single account for utilities such as water, sewer, gas, or trash. In such cases, landlords typically add a pro-rata share of utilities paid by the landlord into each tenant’s rent.
Give your tenant a list of utility companies providing service to the property so they can contact the companies and arrange for the transfer of service. Once the utilities have been transferred, ask the tenant for proof so you have documentation on file.
7. Inspect the property with the tenant before they move in
Landlords need to inspect the property with the tenant before they move in and complete a move-in checklist. A move-in checklist documents the rental unit’s condition, including any damage already present.
A good checklist helps to prevent confusion about the unit’s condition when the tenant moves in. The landlord should also take photos or videos of the unit to document its condition.
Some items that are typically included on a move-in checklist are:
- Date of move-in
- Names of landlord and tenant
- Description of the property (address, unit number, etc.)
- Condition of the walls, floors, ceilings, doors, and windows
- Condition of the plumbing fixtures and appliances
- Functionality of the electrical outlets
- Cleanliness of the property
- Lawn maintenance and landscaping
- Trash and recycling service (who is responsible)
Confirm that all utilities transferred into the tenant’s name are working properly.
A well-organized lease-signing process shows that you are professional and attentive, which can encourage tenants to take better care of your property and renew their lease agreement.
By planning ahead, you can ensure that both you and your tenant are happy with the agreement.