As a landlord, it’s in your best interest to protect your investment property. After all, buying an investment property is a huge financial undertaking.
A lease agreement is a legally binding document. It binds both parties to the lease to certain responsibilities, policies, and clauses. A properly drafted agreement will provide guidance in certain scenarios. For instance, how much rent a tenant must pay and when and where it is due.
How Can a Landlord Draft a Lease?
As a landlord, you may be able to draft a lease in a number of ways. One option is to seek the expert help of a property management company. A good company will have years of experience drafting lease agreements and will provide you with all the necessary help to get going.
Is a Lease Agreement Really Necessary?
When renting out a property, there are certain rules and regulations that you expect tenants to abide by. Having a solid lease agreement will help you cut back time from having to answer, for instance, repetitive inquiries.
Also, should you find yourself in court, the lease will act as a source of evidence. Otherwise, it’d be your word against your tenant’s.
What Terms Should a Lease Agreement Contain?
Different lease agreements will have different clauses. However, there are certain things that normally cut across regardless of where a property is located or what size of a portfolio you have.
The following are important clauses that every lease agreement should contain.
1. Names of the Landlord & Tenant
These details are a must-have in any lease agreement. After all, it’s a contractual agreement that involves the two parties.
You must write the names as they appear on the driving license. In addition, you should also write the property address, including the specific door number if the unit is in a multi-unit complex.
2. Rental Duration
Don’t make any assumptions; let the tenant know the exact length of the tenancy. Make sure to state the complete date, including the day, month, and year.
The importance of doing this is to avoid holdover situations. That is, when a tenant refuses to move out after their rental duration is over. This often presents a unique challenge to landlords.
To remove such a tenant, you’d have to obtain a court order from the courts. This can take several weeks to months, not to mention the emotional and financial toll the process can have on you.
3. Rent-Related Details
Consistent rent payments are key to the success of any landlord. However, if the details are ambiguous, you’ll have a difficult time achieving this goal. That’s why it’s important for landlords to be clear when it comes to rent-related matters.
Make sure to mention the following details.
- Rent Due Date – Specify exactly the date when the tenant must have paid the rent amount. For example, August 1ST, 2023. This will help minimize confusion over when rent is due.
- Rent Amount – Specify the dollar amount the tenant must pay every month. In addition, you may also want to mention how much the security deposit is, as well. The state of Colorado doesn’t limit how much landlords can charge tenants.
- Grace Period – Colorado law requires landlords to wait seven days after rent is due to charge a late fee.
- Late Fees – Specify how much late fees you charge (if any). If you do, however, ensure to abide by state law. In Colorado, the late fee cannot exceed $50 or 5% of the total amount owed that month. You can also charge the late fees more than once per month, as long as the total doesn’t exceed the limits.
Finally, make sure that both you and the tenant append their signature to the lease agreement. This serves as a testament that both of you have reached an agreement.
Other Important Clauses and Policies to Include in Your Lease
The following are typical clauses and policies that your lease should cover.
You can choose to allow or forbid tenants from subletting your property. Regardless of the decision you take, though, make sure to clearly spell it out in the agreement.
For instance, if you permit tenants to do it, make sure to state that they must seek your prior consent beforehand.
2. Tenant Obligations
State law requires landlords to provide habitable rental premises. Equally, tenants are responsible for certain things, too. When it comes to maintenance, you can require them to empty out the trash, keep the property clean and sanitary, and repair damages they cause.
3. Property Access
Tenants have a right to peace and quiet enjoyment of their rented premises. As such, it’s important to define the landlord entry rules to avoid potential harassment lawsuits.
For instance, let the tenant know the possible reasons for entry and the notice requirement. Common reasons for landlord entry include the following.
- To inspect the property.
- To respond to a repair request.
- To show the unit to a prospective renter or buyer.
- To serve an important notice.
And although Colorado doesn’t have any specific landlord-tenant laws, make sure to provide the tenant with a notice of at least 24 hours prior to entry.
4. Lease Termination
There are justified and unjustified reasons for breaking a lease. For clarity, make sure to list the justified reasons that the tenant may use to break from their lease obligations penalty-free.
In the state of Colorado, such reasons include active military duty, habitability issues, and landlord harassment.
Drafting a clear and detailed lease agreement is key to preventing potential conflicts or misunderstandings between you and the tenant. If you need help drafting a lease or the overall management of your property, Keyrenter Denver can help. We provide quality property management services to property owners in Denver, CO. Get in touch to learn more!