No matter what type of tenancy, landlords who rent out properties need a solid tenancy agreement. If you are creating tenancy agreements from scratch, they can be quite lengthy and complicated.
Although it can be tempting to stick to a template you have used for years, this could leave you open to disputes or breaches.
This article will show you how to create a solid tenancy agreement with minimal legal training. A solid tenancy agreement can be built by simply being familiar with standard and unenforceable clauses.
We will also discuss the benefits and drawbacks of standard templates and how to use them best when you don't have a blank piece.
What is a Written Lease Agreement?
A lease agreement is a legal document that specifies the terms and conditions for renting property. A rental agreement usually stipulates a period of rent, such as a month to months.
However, a lease agreement can be used for longer-term rentals that last more than six months.
Both residential and commercial rentals have standard lease agreements. Both residential and commercial rentals can renew a lease at any time after the initial term ends.
The property and the landlord and tenant's needs will determine the lease's terms. The majority of leases will include basic information such as:
- Description of the property
- The agreement will continue for some time
- Rent price
- Non-payment can have serious consequences
Because they outline the expectations and responsibilities of both landlord and tenant, leases are crucial when renting a property.
Lease agreements may be mandatory in some states. Even if not mandatory, lease agreements will protect both parties interests and help avoid disputes.
You could lose rent money, be held liable for illegal activity, or have to pay for costly repairs. A legally binding lease agreement is recommended for anyone renting studio apartments in residential areas or commercial buildings.
A real estate attorney can help you understand what constitutes a legally binding lease agreement and what information you must include.
Types Of Lease Agreements
Many lease agreements can be used for commercial and residential real estate. These are five types of lease agreements most commonly used in commercial properties:
Net Lease
A net lease means the tenant will be responsible for all taxes, insurance, and maintenance costs, in addition to the monthly rent.
Double Net lease
A double net lease agreement requires that the tenant pays all taxes, insurance, and monthly rent. However, they are not responsible for paying maintenance costs.
Triple-Net Lease
A triple net lease (sometimes referred to by NNN) requires that the tenant pays taxes, insurance, maintenance, and rent for the property.
Absolute Triple-Net Lease
The tenant is responsible for paying all costs associated with the property in an absolute triple net rental agreement.
The landlord is exempted from all maintenance, taxes, and insurance responsibilities. This lease agreement could lead to the tenant being required to pay for repairs to the roof or main structure.
Percentage Lease
A percentage lease requires that a tenant pays a base rent and then an additional amount depending on their percentage of the profits from the business.
Fully Serviced Lease
A fully serviced or gross lease covers all utilities, taxes, and insurance. This lease places the greatest responsibility on the landlord and is often only used for short-term agreements.
Why is a Rental agreement necessary?
If you're already in a contract, it may be beneficial to create a new one or sign an existing one.
- A homeowner who intends to rent out a property
- A property manager who manages properties for a landlord or landlady
- A homeowner plans to rent out a portion of their residential property. This could be an annex or one bedroom.
- Tenant looking to lease a property or a room from an existing owner without an agreement.
What Should be Included in the Contract?
A rental agreement can be as simple or complex as you wish. The level of detail will vary depending on the contract.
Some can be pages long and include many appendices. Others are simpler. Even in a basic agreement, covering only the essentials is beneficial.
For even the simplest rental agreement, there are some provisions you should consider:
- The term of the lease (e.g., 6 or 12 months)
- Conditions of contract renewal: For example, a rolling contract. Or giving notice in advance to renew the contract after completion.
- Weekly, monthly, or annual fees
- The security deposit value
- Contact details and names of all tenants
- Contact details and names of property owners/managers
- Scheduled payment dates (e.g., rent payable on the first of each month)
- Method of payment agreement
- Paying utilities: Does the lease include bills? Or is it the tenant's responsible for paying for the utilities as well as rent?
- You can access many amenities, such as a gym, parking, or communal gardens.
- Policies relating to pets
- Conditions for guests
- Penalties for missed or late payments
- Conditions and charges to cancel the contract before it expires
- Conditions for property damage
The rental agreement should clearly outline the obligations of the tenant and the owner.
For example, if there is a garden, the agreement should clarify who is responsible for its maintenance.
What to Consider in a Tenancy agreement?
The tenant should pay extra attention to their tenancy agreement. It will outline the law regarding what you can and cannot do, what your landlord expects of you, how long you will be renting, and whether rent is included in your rental agreement.
Tenancy agreements are legally binding contracts between you and your landlord. They define your tenancy's terms and conditions and the type of tenancy.
You can choose to have it fixed-term (running for a specified period, usually six months) or periodic (running week-by-week or monthly).
Special Clauses
It's a good idea to review your tenancy agreement before signing it. This will ensure that you are fully aware of your obligations and any rules and conditions you must follow.
Do landlords have any rules about pets and smoking in rental properties? Or do they prefer a more relaxed approach to this issue? What are your obligations regarding cleaning? When is the rent due? What is your preferred method of receiving rental payments from your landlord? These are questions that a comprehensive, detailed tenancy agreement will answer.
It should be written to avoid any confusion.
Most landlords won't allow pets or smoking to be on their property. This is because of the risk involved and the increased chance of damage.
However, every landlord is different.
Deposits
The tenancy agreement will specify the amount of deposit required and how it will be protected. Landlords in England and Wales are legally required to deposit tenants' deposits into one of three government-approved deposit safety schemes: the Deposit Protection Service (My Deposits), the Tenancy Deposit Scheme (Tenancy Deposit Scheme), and the Deposit Protection Service (Deposit Protection Service).
In Scotland and Northern Ireland, separate deposit protection schemes are available.
A tenancy agreement will outline the scenarios where a deposit may be withheld, either partially or entirely (to repair any damage that you have caused during the tenancy).
Rent Payments and Bills
The tenancy agreement will outline what bills you'll have to pay. Sometimes bills are included in the rent. Other times they are not.
It varies from one tenancy to the next. Utility bills (water, gas, and electric) will often be due.
If tenants live in a house with multiple occupations (HMO), they must also pay council tax. In this case, the landlord will be liable.
The rent price, payment terms, and how the rent will be collected will all be stated in the tenancy agreement. It will include information about the start and end dates of a tenant's tenancy, as well as details on how to terminate an early termination and what steps you can take.
Decorating and Repairs
Your tenancy agreement will also clarify who is responsible for minor repairs. Some landlords are happy to let tenants do minor repairs themselves.
In other cases, they prefer that the tenant arrange repairs by the property manager or letting agent.
You will also find out if you are allowed to redecorate and if you need permission. There will also be rules about how posters can be stuck up, gardening maintenance, and adding furniture.
Subletting
Subletting is a grey area when it comes to tenancies. Subletting is allowed by your tenancy agreement. Again, this is an individual decision.
Each landlord has different rules for tenants. They could face severe penalties and even legal action if they are caught subletting illegally without permission from their landlord.
Making Changes
Tenants have a lot to be aware of and take in. For some, this might be overwhelming. Some people might be so eager to move into a rental property that they don't bother to read the tenancy agreement, potentially putting their lives at risk of complications and other problems later.
Ask your landlord or letting agent for clarification if you are unsure about the terms of your Tenancy Agreement.
Citizens Advice provides free online information on tenancy agreements for those needing to consult a lawyer.
You must agree with your landlord if you wish to modify your tenancy agreement. It is against the law for landlords to discriminate against your age, gender, or race.
You can also be discriminated against if you are pregnant or have a disability.
Suppose you are partially or blind and need a guide dog, but your landlord won't allow pets in your home. In that case, the landlord must modify those terms to allow the guide dogs unless there is a compelling reason not.
Giving Notice
The terms of your tenancy agreement will outline how long notice you must give to terminate your tenancy. Unless your landlord agrees or there is a break clause in the tenancy agreement, you will still have to pay rent for the entire term of your fixed-term tenant.
This is another reason to read your tenancy agreement carefully to understand your rights fully.
It can be thrilling to move home. Some people sign a tenancy agreement with an eagle-eye, eager to rent a home. With so much important information in a tenancy contract, this is not a smart move.
It is important to read and understand the tenancy agreement before you sign it.
How to Write a Lease Agreement?
There are many templates for lease agreements online. However, you must know how to create a lease agreement. Having your lease agreement reviewed by an attorney before you sign it is a good idea.
These steps will help you with your question - how to wite a lease agreement:
Lay out your Lease Agreement
Both parties should have clear and organized lease agreements. An outline is a good way to ensure the lease agreement is clear and easy to read.
You can add subheadings to each section. You might want to include the following headings in your lease:
- Leasing Property
- Term
- Rent
- Deposit
- Utilities
- Occupancy
- Tenant Rights and Responsibilities
- Landlord Responsibilities and Rights
- Lease Termination
- The Governing Law
Headings should be bold or underlined to stand out and easily be found in the document. You can also search for lease agreement templates to find other heading ideas.
Important Provisions
It is a good idea to compile a list of the conditions your lease should cover. How would you like your rental to work? Once you have a list of provisions, you can categorize them under your headings.
Build Your Lease Clauses
Each provision must be clear and contain all information. This is how you convert provisions into clauses. Every clause must be legally binding.
You may want to consult an attorney to ensure that each clause is enforceable.
Consult Local Real Estate Lawyer
The state laws that govern the inclusion of clauses and provisions in lease agreements may be a guideline. To ensure your lease agreement complies with the law, consult your local laws.
Formatting and Fine Tuning
A title and signature section should be included in your lease. You should review the document to ensure you have all the required headings, provisions, and clauses.
Electronic Signatures are Emerging for Signing Rental Agreements
Many aspects of our lives are digitalized, so it is not surprising that many companies are moving to online solutions.
Although it's too early to celebrate the digital age of paperless offices and companies, we are closer than ever.
Online rental agreements could be the perfect solution if you're in the rental business and want to grow your career.
This trend is quickly gaining popularity so you will have a competitive edge. You won't have to pay a lot for online rental paperwork.
And you'll be rewarded with the benefits listed below.
Esign is Legal
Landlords should be aware that e signature documents can be legally construed.
Both the landlord and tenant have rights in the rental agreement. The lease agreement must stand up in court in case anything goes wrong. To make the rent contract legally binding, both parties must sign it.
Electronic documents that have an eSignature are legal documents. The U.S. Electronic Signature legally protects all electronic signatures and transmissions in the Global and National Commerce Act of 2000.
eSign is legal in 188 countries thanks to international laws.
Secure
You will need a username and password to access your eSign account. Both are protected by the 256-bit SSL method.
All personal data is encrypted in the same way. Sessions are automatically closed after a specified period to prevent others from seeing your information.
Save Time
The greatest benefit for landlords is the time they save. The traditional way of signing leases is to send emails, print contracts, sign them, scan them and then return them.
It can be even more time-consuming to meet new tenants in person. You can send the lease online using free electronic signature.
Tenants then have time to read it, eSign, and email it back. Imagine how fast the process will be.
Additionally, eSigning documents are a great solution for landlords living far away who need to make agreements and contracts electronically.
This is possible and painless with electronic signatures.
Better Document Management
An authentic copy of any rental agreement must be created before it can be signed. You also have a digital record of each transaction.
Convenient For Landlords And Tenants
You can access your lease agreements as long as you have internet access. You don't have to rush to the office to search through files for a contract.
To save rental agreements on your computer, you can download them. You can print them if needed, but most landlords prefer the digital version.
Rent collection apps have the advantage of being able to process rental applications and eSign documents. This makes it easier to run your rental business.
Easy Lease Renewing
It was easy to sign the original rental contract. Any lease renewals can be done the same way, saving you time.
Landlords Get a Better Reputation
Online services are becoming increasingly popular with the new generation of renters and even many of the more senior.
E-signing is still relatively new. This allows you to be different from your competitors by offering this service. Happy tenants are more likely to leave positive reviews.
These actions can lead to an increase in unit occupancy.
Saves Environment
Printing leases are expensive. Printing leases can be expensive. You will need to pay for paper, photocopies, printer wear, and toner.
All of these costs quickly add up. Online lease agreements can be modified unlimitedly without the need to reprint. You will also be "green," which is great for your business reputation.
People are attracted to companies that help the environment.
The Key Takeaway
Both are renting a house and building a rental property are very daunting. There are also legalities.
You need a great rental agreement to do this.
There are many things you must do to create a great rental agreement. But this guide and Bit.ai should help you get started.
Take the time to ensure that the agreement is perfect the first time. You won't have to modify it again. Only a few minor modifications
Although online documents are well-established around the globe, the trend toward electronic documents is on the rise.
The paperless future will certainly be a reality for all businesses. And you're not the only one who can take advantage of this trend.
Ten steps ahead of the competition are successful landlords, so take this chance to be a leader!
