Leases: Your Second Line of Defense

Creating Your Own Leases

Your lease is your 2nd line of defense. ( Those that know me well know that I say your screening is your 1st line of defense.) Your lease Informs tenants of not only what to do but what not to do as well. If you haven't had the pleasure of going to court about a lease violation yet, I can tell you from experience that the 1st thing the judge asks is was it in your lease. Was it explicitly in your lease? Anything you want to enforce in the court of law has to be in your lease.

Structure

How you structure your lease is mostly up to you. I say mostly because your state can dictate some forms that may be required. Beyond that, it's up to you whether or not you create forms for specific groupings of rules or drop them into your rental agreement and just a Rules & Regs section.

I used to be one who prefers to have separate pages for groups of lease regulations. Then I realized how annoying getting signatures on each page was or how much paper I wasting or how much time was wasted attaching multiple documents to a pdf. I changed my strategy to only having separate documents as what was required by the state or what where optional forms based on tenant choices (i.e. pets)

SEPARATE FORMS

Beyond what Wisconsin requires in its rental agreements (Non-Standard Rental Provisions, Smoke & Carbon Monoxide Detector Agreement) I have four separate forms for specific purposes: Pet Policy (because not every tenant will have a pet), garage rental agreement (not everyone has a garage), and move-out expectations.

I also have a Rules and Regulations sheet which lists every clause I want included in my leases that doesn’t come on my pre-printed rental agreement (state specific and drafted by a registered Wisconsin attorney by the way) and isn’t worthy of a separate document.

As I stated earlier, the more additional pages you have to a lease packet the more signatures are needed which can be a little annoying. Remember that anything you attach to a rental agreement should be signed as well. If you create a parking policy and it is not incorporated into the Rules & Regulations, that parking policy should be signed by the tenant.

WHAT TO COVER IN YOUR RULES AND REGULATIONS

What you cover in your Rules document will vary by the property you are renting out and also your own preferences. This document should include any rules you want to be able to remove a tenant for violating that aren’t included in the rental agreement. I’ll go over a few common good idea clauses here.

Room/Window A/C Units Because the units I own don’t have central air I often have people putting in their own A/C units. After years of dealing with tenants who didn’t know how to properly install window a/c units, I finally banned them. Now My tenants are only able to use room A/C units. My rules covers the fact that window a/c units are not permitted and points them to room a/c units.

Noise Violations It's a good idea to cover quiet hours, what constitutes a noise complaint, and what the consequences are.

How Many Strikes And Then You’re Gone It’s also a good idea to have a quota for how many warnings or violations a person gets before they are in danger of their lease not being renewed. Its important to mention that the violations don’t need to be for the same offense. A tenant violates 3 lease clauses in a year, they could lose their ability to rent from you.

Animal Policy It’s a good idea to put in your Rules that unless a specific addenda is attached that pets are prohibited. In the same clause tell them the penalty for violation, what pet rent/deposit might be, and it’s a good idea to include any breed/size restrictions you have. This clause isn’t giving them permission to get a pet (they still need to seek that beforehand) but it's to prevent the sticky issue of a tenant going out finding the perfect pet, falling in love, then finding out you won’t permit that pet.

Commons Areas If your building has common areas (whether it be yard or interior) include rules regarding personal items in common areas,smoking, loitering, etc. Pro tip: It’s best to be specific about limiting items in common areas. We permit one wall or door hanging attached with 3M strips and up two items on the floor (including shoes). (Note: check your local fire code for other restrictions on personal items in the hallway.)

Personal Vehicle Restrictions If you want to limit the storage of boats, RVs, driving of ATVs or other such things this should be included in your Rules as well.

Other items you should consider covering: parking rules, interior painting, maintenance items the tenant is responsible for (bulbs, etc), payment agreement rules, etc.

FEE SCHEDULE

It’s a good practice to have ANY fee you want to charge to a tenant included in the lease. In fact it's not a best practice, it's a necessity. Whatever you want to impose a fine for, you need to include when a fee would be incurred and what the fine would be. I.e. If a tenant requests a copy of their lease, the charge is $5. Or a better example, if pet feces must be picked up its’ a $75 fine for 1st offense, etc.

This isn’t to say that a fee schedule permits you to charge the tenant for anything you want as long as it's in the lease. Judges can absolutely strike down a fee because they feel strongly against that type of fee or that its fee is too high.

DO YOU NEED DIFFERENT LEASE PACKETS FOR DIFFERENT TYPES OF PROPERTIES?

The easy answer is usually no. In most cases, you don’t need to have different lease packets. The only time a lease packet might be substantially in clauses from others is when you are dealing medium to large multifamily (6+ units).

If you have a portfolio with SFHs and duplexes you can get away with one lease packet. I would just include a section for each type as to rules that may only apply for them. I.E. SFH the tenant takes care of snow removal and lawn care but maybe on the duplexes that's included.

DON’T NEED AN ATTORNEY TO DRAFT IT BUT IT SHOULD BE REVIEWED

I highly recommend having documents that you draft along with the main rental agreement reviewed by a real estate attorney in your state. It’s less expensive to you if they just review what you have rather than asking them to draft the whole thing. If you get your rental agreement from an online source I would definitely include that to be reviewed. Just because you purchased it with a guarantee that it will work in your state doesn’t mean that protection will save your tushy in court.