Writing Your Own Lease Agreement: The Devil’s In The Details

Your lease should make life easier on you and on your tenants.

A rental agreement.If you’ve ever had reason to pay attention, you’d notice that most of the sizeable property management firms around Detroit use their own lease agreements. Why? Simple: because as you manage more and more properties, you come across more and more circumstances that you wish you had written into your lease in the first place — and so you do. Comprehensive leases can neatly avoid common problems and minimize the work you have to put into problems that are unavoidable.

It’s also helpful to have a comprehensive lease when you hire a new manager. Every new manager has their own style and techniques for dealing with problems, but from the company’s point of view, consistency is beneficial — so having the solutions built into the lease agreement rather than depending on individual managers is a good thing. Customized lease agreements, then, are excellent for both guiding new employees and protecting the company from common issues.


What’s In a Lease?
While it varies according to state law, generally speaking, lease agreements will contain:

  • The amount of rent.
  • The due date of the rent.
  • Any details about grace periods for rent payments — most importantly to property managers, the ‘joint and several liability’ clause that indicates that if one of a set of leaseholders fails to pay their portion, the others are liable for it.
  • Similarly, details about late fees.
  • Amounts of security and/or other deposits
  • Maintenance responsibilities
  • Entry and inspection
  • Guests — how long they can stay, how many, etc.
  • Holdover tenancy
  • Anything else your state requires (in Michigan: Truth-in-Renting Act, Security Deposit statutes, Lead-Based Paint & Domestic Violence clause).


Now, the flipside to ‘what a lease should contain’ is ‘what a lease shouldn’t contain’ — and the answer, according to MichiganLegalAid.org, is anything that would:

  • Waive the right to a clean, habitable dwelling
  • Let the landlord alter the lease in the middle of its period
  • Violate the Civil Rights Act or the Persons with Disabilities Civil Rights Act
  • Waive the rights established by Michigan’s security deposit law
  • Violate the Consumer Protection Act.

 

Clauses for Thought
We covered the basics above, now here’s some other issues you may want to cover in your lease:

  • Who pays for water and how
  • A per diem late fee for excessively late payments
  • Suspension of any grace period if tenant abuses
  • When a tenant will be expected to handle a pest issue and when landlord will
  • Specifying the Move-Out process
  • What else can you think of?


Generic Leases
The most commonly used lease in America is the generic lease created by the National Association of Realtors, because it’s been reviewed by an attorney and is acknowledged as a solid, basic lease agreement by basically everyone. Unfortunately, this lease doesn’t create defined roles for maintenance, lay out security deposit rules, mention holdover tenancy, or any of many other details that every management company handles differently. Few people go out and make addendums to the generic lease, because it makes just as much sense to start from scratch and build your own from the ground up.

The biggest mistake that people creating their own lease agreements make? They fail to have their agreements validated by a lawyer before putting them into play. That can be a costly error when you realize after years of using them without issue that your lease agreement has a legal loophole or other issue that a clever and malicious tenant is taking advantage of. Always get your paperwork examined by a lawyer.

Posted in: 1. Property Owner Blog Posts, Managing Rentals

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