In this episode, you’ll learn:
1. Where to get a good lease
2. What documents should be included in your lease package
3. Who needs to sign the lease
4. How to legally & efficiently accept security deposit and advance rent
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Where Should Landlords get a Lease?
I think I’ve beaten this horse to death so I don’t want to spend too much time on it in this episode but let me just say – Don’t shortcut yourself on your residential lease template. It’s wild to me when investors will pay a coach $5000 but won’t invest a few hundred dollars for a lawyer-approved residential lease.
If you don’t know if a residential lease is any good, and the only way you know it will be good is to hire an attorney to tell you, then just your residential lease right from an attorney. It will probably be cheaper. Plus I know from my own firm, I wouldn’t update outside leases. It was much much easier to just work off my own templates which I updated regularly rather than cross reference every single term.
Pro tip: if your lawyer doesn’t have their own template to work off of, find another lawyer.
The only time I review leases at my law firm is when I’m representing the tenant. Landlords need their own custom template and really a template package because there’s often a lot more to the lease than just that singular document.
What should Landlords Include in their Residential Lease Package?
In addition to the residential lease itself, landlords should include required disclosures like lead paint, bed bugs, or even condominium rules. Some of these disclosures can be a simple paragraph right into the lease. Others, like condo bylaws, are easiest to incorporate as an exhibit to the lease.
Getting Required Tax Information From Your Tenant
While not incorporated in the lease or by reference as an exhibit, Landlords should include a 1099 in their lease signing process because if it doesn’t happen then, you’ll be scrambling come tax time. It’s just easiest to bang out that quick document from the tenant from the get-go than look for it later.
Don’t make a landlord mistake with your tenant welcome packet
A common mistake I see landlords make is putting information that should be in their lease into their tenant welcome or onboarding packet. Your landlord rules belong in your residential lease. Keep your welcome packet to “nice to know” information, not “nice to know.”
This is important because if a tenant violates a rule, you may want to start the eviction process or just send a warning letter that the eviction process is the next step. But if it’s not in the lease, it’s not a rule, the tenant agreed to. Tenancies are a two-way street, not a dictatorship.
Who Should Sign a Residential Lease?
- All tenants – yes even the one with bad credit.
- Co-signors and guarantors
- You! The Landlord
How Much Money Should Landlords Accept At the Time of Lease Signing
The first step is to collect something. In order to have a legally binding lease (which we want!), you must have consideration. The consideration could be as little as $1.00 but that would just be a bookkeeping a headache. Most landlords will do something like first month rent or security deposit or some combination of advance rent and security. No right or wrong, there’s a LOT of variation on this in state law, so check with your local laws to see how much money you can legally hold.
Some landlords will require some payment at the time of lease signing and then another payment at the time of move in, so they aren’t holding too much money at once.
Where does the lease consideration have to be held?
Money classified as security deposit is usually legally required to be held in a separate bank account from your operational bank account. Some states take things a step further and require a separate bank account for each tenant.
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