So you want to rent out a property and be a landlord? Great! Renting property, whether it is your home that you kept after a move or whether it was a property purchased for this express purpose, can be a great way to add an additional stream of income to your household. However, being a landlord is not without its challenges. A common debate among owners is: Do I really need a lease agreement? The answer?
Yes, if you have a property that you are renting out, even to family or friends (actually, ESPECIALLY to family or friends), you need to have a written, signed, lease agreement. Check out why!
1-) Verbal contract versus written contract. One of the biggest reason for disputes in rental situations is unclear or un-stated expectations. When landlords have a verbal contract with a tenant, there is no record of what was stated. Misunderstands abound, selective hearing can come into play and there is no record of what was decided if you should ever need to reference the discussion in the future. Truly, it’s just a bad business practice. However, verbal agreements between a landlord and tenant are common when the landlord is a new landlord, is renting to friends or family, or is managing the process themselves. No property manager worth getting paid would ever recommend renting a property without a written, signed lease agreement.
2-) Be clear. If you are a landlord that is managing your own property, as we discussed above, you should always have a written lease agreement. You can get template copies online and can modify the template to fit any additional points that you want to be sure are included. You can also submit the lease to an attorney or legal review to be sure that all required points are included. A good lease should be explicitly clear. If the tenant is responsible for lawn care, be sure that is included. If they are not allowed to have pets at the location or if there will be an additional charge for pets, add that into the agreement. A good lease agreement must be clear and deal with any key issues in writing. Also, if you are writing your own lease agreement, be sure to check with your state for any mandatory points that have to be included in any lease contracts such as lead paint notices, fair housing information, etc.
3-) Legal protection. A lease agreement protects you legally. As we discussed above, if there is only a verbal contract in place, there is no way to prove what was agreed upon or what rules are in place. Verbal contracts leave the door wide open for misunderstandings, disputes, and law suits. In court, the one with the most (written!) documentation usually fares the best. As a landlord, having a written lease protects you legally in the event that the tenant decides to sue or in the event that an eviction has to take place.
4-) Family and friends. But what if you have family or friends renting your property? Surely you don’t need to worry about them, right? Nope! If it’s possible it may be even more important for family or friends to have a written lease. Setting clear expectations at the front end of them renting your property can help resolve or remove countless misunderstandings before they even occur. Keep in mind that you may alter your lease agreement for family or friends to make changes such as allowing pets when you normally wouldn’t or including utilities in the rental amount where normally you would not, but all these features need to be clearly documented in writing and signed by all parties. You’ll be glad you did down the road if issues arise. It is so much better to be able to produce a signed agreement of terms in a discussion than to have to stiff-arm family or friends to meeting the requirements of a lease.
5-) Get a property manager. Truthfully, while owning a renting out rental properties can be a great income source and a very interesting learning opportunity…….it also comes with headaches. The legal climate favors renters over landlords and it can be nearly impossible to keep up with all the rules and regulations. Consider hiring a quality property manager to advertise, conduct maintenance, screen applicants and fill your unit. Especially for owners that don’t live near their property or for first-time rental property owners this can be a life-saver.
To get the tailored policy coverage that you need for your home, valuables, auto, LIFE, or business, call The CHOICE Insurance Team today at 757-416-5100 and ask for a free, comprehensive review. Give us a call today!
All the Best,
The CHOICE Team
In 2008 Choice Insurance Agency was created out of the former Realty Consultants Insurance Agency founded in 1980 by George Ayers Capt. USN Ret. Since 2008 the Choice Insurance Agency has more than tripled in size and is continue on a track of rapid growth. The Choice Insurance Agency focuses on four areas of expertise: Private Client Group, Coastal Coverage, Senior Programs and Commercial/Business Insurance. Our business model has allowed us to expand into all of the states on the Eastern Seaboard from New York to Florida including Pennsylvania and DC to better serve our ever-growing client base. As an Insurance brokerage stationed in Hampton Roads with access to well over 40+ insurance carriers, the Choice Insurance Agency is able to shop for the best rates, cover those picky coastal zones and create a tailored plan to fit your insurance needs. The Choice Insurance Agency. Call us today and see why we are the top “CHOICE” in Hampton Roads.