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How to Create a New Lease When Renewing a Long-term Tenant
My tenants have been in place since 2019, and so far, I have been renewing and updating the lease with a 1-page Lease Amendment-Renewal Agreement stating the new term and increased rent amount. For their upcoming renewal, I would like to draw up a brand-new lease and add an updated pet policy so they will know my rules if I give written permission (they have asked us to consider a dog- which current lease says no pets, but considered case-by-case). The property is in PG county Maryland, and I live out of state. Since I've never done a new lease for renewing an existing tenant, I have some questions:
1. Are there disadvantages to creating a new lease for renewing tenants? I'm thinking one might be that it wouldn't show established long-term tenancy in the case that I may want/need to for lending purposes. However, I assume lenders will want to see a professional looking lease rather than a 1-page amendment. Does any of this matter if I need lenders?
2. The original lease was provided by the Real Estate company who listed our place for rent and secured my tenants. For a new lease, I will need to create a state-specific one through some online entity. Do you have any recommendations for one that can be customized with clauses and downloaded- not just sent to tenants online once done? A blank word doc that I can edit, save and send myself would be ideal. I am seeing some online auto-generated that range from $30-$100 - some requiring a membership that includes other services that I don't need right now, and I'm not sure they are all customizable for me to add my own addendums or clauses. What do you use for creating state-specific leases?
3. What should I put in for the security deposit- since they gave it in 2019? I assume I just put the original amount they provided. Do I need to put in the date they gave it, or not?
4. The original lease has addendums (several pages) for Lead Poisoning Prevention Act and Disclosure of Info on Lead-Based Paint and Hazards. I think these are required by my state. I assume I need to obtain and include these again and hope they will generate automatically with whatever online state-specific lease creator I use. Does anyone know where to get these addendums if it isn't provided by a lease creator?
5. I have asked my tenants to confirm their contact info and names of all people living in the house including name and age of their children. When we did our last walkthrough, I suspected they have a roommate. I'm actually not sure if I need to do anything if that turns out to be the case. What are the risks to me if they get a roommate and don't tell me? Are there limits to the amount of people appropriate/allowed for the size of home? Is any of that dictated by my state/county, or is it whatever I'm comfortable with? It's a 4 bedroom home. The original lease shows 5 people, no ages (husband, wife, and either 3 kids (or 2 kids and possibly the roommate- in which case is fine as long as they don't now mention another person).
6. If there's anything else I should consider or make sure to do, please let me know. Thanks in advance!
1. Are there disadvantages to creating a new lease for renewing tenants? I'm thinking one might be that it wouldn't show established long-term tenancy in the case that I may want/need to for lending purposes. However, I assume lenders will want to see a professional looking lease rather than a 1-page amendment. Does any of this matter if I need lenders?
You will want to get the tenant on a new lease agreement when you have substantial updates to the lease agreement or a new lease altogether. It's your opportunity to improve your lease agreement and to enforce lease terms that you want enforce and that may not have been in the prior lease. Yes, lenders want to see a written lease agreement, and in some cases, a year term (not month-to-month).
2. The original lease was provided by the Real Estate company who listed our place for rent and secured my tenants. For a new lease, I will need to create a state-specific one through some online entity. Do you have any recommendations for one that can be customized with clauses and downloaded- not just sent to tenants online once done? A blank word doc that I can edit, save and send myself would be ideal. I am seeing some online auto-generated that range from $30-$100 - some requiring a membership that includes other services that I don't need right now, and I'm not sure they are all customizable for me to add my own addendums or clauses. What do you use for creating state-specific leases?
Beware of lease agreements online. First, as for the state of Florida, lease agreements can only be created by attorneys, except for Supreme Court approved standard leases in your state. Not sure about your state, but you should check into that. Also, you should get a lease agreement drafted by a landlord attorney specialist. I've specialized in landlord-tenant law since 2006, and I can tell you, most lease agreements out there (including from notable online sources) are only standard leases and do not have a professional landlord business in mind.
3. What should I put in for the security deposit- since they gave it in 2019? I assume I just put the original amount they provided. Do I need to put in the date they gave it, or not?
You will simply need to reflect in the new lease what the deposit is and that it was paid already.
4. The original lease has addendums (several pages) for Lead Poisoning Prevention Act and Disclosure of Info on Lead-Based Paint and Hazards. I think these are required by my state. I assume I need to obtain and include these again and hope they will generate automatically with whatever online state-specific lease creator I use. Does anyone know where to get these addendums if it isn't provided by a lease creator?
If the home was built prior to 1978 then it should have a Lead Based Paint Disclosure Yes, you will need to attach the required disclosure as an addendum in the new lease. The housing department in your state likely has the disclosure form on their website. It's also a standard form that real estate agents have access to through their realtor associations.
5. I have asked my tenants to confirm their contact info and names of all people living in the house including name and age of their children. When we did our last walkthrough, I suspected they have a roommate. I'm actually not sure if I need to do anything if that turns out to be the case. What are the risks to me if they get a roommate and don't tell me? Are there limits to the amount of people appropriate/allowed for the size of home? Is any of that dictated by my state/county, or is it whatever I'm comfortable with? It's a 4 bedroom home. The original lease shows 5 people, no ages (husband, wife, and either 3 kids (or 2 kids and possibly the roommate- in which case is fine as long as they don't now mention another person).
If you find out that the tenant is violating the lease agreement currently, reconsider whether you should rent to them for another lease term. If your lease prohibits unauthorized occupants, and they violated that provision, that is (in the state of Florida) a curable violation, which requires a 7 day notice to cure. Your state likely has a similar curable violation statutory provision. Look to your lease too to see if it imposes greater procedural requirements on you to give the tenant notice to cure a curable violation.
In Florida, some local ordinances limit the number of occupants in a rental home based on the number of rooms. HUD also has occupancy restrictions based on the size and number of rooms. The risks are this: the more people that live there, the greater the risks of damage to the property. Of course, not knowing who is living there may have other risks, such as, are there any convicted sexual or violent offenders living in the home. This is why I always advise my clients to have all occupants go through a background check to be considered for a lease renewal. If you do not have any background check results of the current tenants and occupants, you should consider doing that before offering a new 1 year lease term. Additionally, their financial qualifications to re-rent the property may have changed since they first rented the property. Thus, getting their income verification is a good idea to make sure they can afford to rent the property.
6. If there's anything else I should consider or make sure to do, please let me know. Thanks in advance!
So much more :) Best wishes!
Quote from @J. Nicci Coffie:
If you suspect an unauthorized occupant, you need to inspect and verify. Don't let things like that go unchallenged or you may find yourself in a pickle down the road.
Biggerpockets sells a Lease Agreement Package under "TOOLS" at the top of your screen. $100 for a lease and several other documents, written by investors and attorney approved for your state. It's better than what you'll get from most attorneys and what you'll find on the internet.
Lead Paint is a federal requirement and the form is available for free all over the internet. However, I always recommend you get it from a federal website, like the EPA. You also need to have the pamphlet to share with tenants. Learn more here: https://www.epa.gov/lead/real-estate-disclosures-about-poten...
Nathan, Thanks for the guidance and resources. I'm still unclear what potential issues can happen if they did get a roomate and didn't tell me.