Follow Us on Social Media

email icon rss icon linked.in icon google plus icon twitter icon facebook icon

Protect Yourself As a Landlord With These 6 Crucial Documents

by Eric Drenckhahn on September 3, 2014 · 14 comments

  
Post image for Protect Yourself As a Landlord With These 6 Crucial Documents

As with most jobs, a landlord’s job is not complete until the paperwork is done. A landlord needs to protect themselves with all sorts of documents. The days of renting a home on just a handshake are long gone. Instead, in today’s tenant-friendly states, you need proof of everything. That being said, great tenants do not need any documentation, nor do great landlords. Both sides know what is expected, and both sides perform as you would expect them to – with or without paperwork. The documentation is to protect us (and them) from the unruly behaviors that the ‘other’ guys might have.

Here are 6 types of forms I find crucial to every rental.

The Rental Application

The first document that you will likely need is a rental application form. This of course assumes that you have already decided on a minimum tenant screening criteria and have communicated the criteria to your prospective tenants. It also assumes that you have already prescreened the tenants before they were even given a showing.

This form is used to do a background check. No reputable company will give out credit score, income, and employment information unless you have a signed release. The rental application is what gives you the authority to screen them. The must-have information on the application is name, date of birth, social security number and authorization.

If you do not have a spot on the application for your tenant to give you the permission to investigate them, and/or it is not signed by the tenant, you have nothing. You want the ability to get the background information, or someone you assign the task to, with the tenant’s full blessing. You can even charge an application fee for the privilege of allowing you access to the tenant’s most personal information. I charge $40 per adult.

The application form is also like a business card. It has your contact information on it. It may have a short bio of the property stapled to it and your tenant selection criteria printed on the back.

Tip: Use a common application that is supplied by your background check company. They know what they need to do the background check.

The Holding Fee Agreement

Once you have the filled-out application in hand, you want to lock down the tenant. You do not want them continuing to ‘shop around’ while you wait the six weeks for them to move in. You want a holding fee as soon as they express an interest in the apartment by dropping off the application. Your current tenant, who does not move out for six weeks, does not want to continue the showing process either. This is where the Holding Fee Agreement comes in.

The agreement states, for $1,000 (or one month’s rent) you agree to hold the unit for the tenant. You are not obligated to rent to the tenant with this form. They are still subject to an acceptable background check. If they fail the background check, or you decide to decline them for any reason, you must refund this amount within seven days.

The Holding Fee Agreement obligates the tenant to signing a lease and paying your deposit. If they change their mind, they forfeit the holding fee.

If you call this a deposit, rather than a fee, it may be considered refundable as all ‘deposits’ are. You also want to document on this holding fee agreement the address, lease rent amount, start date of lease, deposit amount, number of occupants and number of pets. No one wants surprises at lease signing time. If you sign a lease too early or neglect to get a holding fee, you are opening yourself up to additional risk.

Related: 6 Brilliant Tools to Make You Look like a Pro Landlord

Tip: If you see a great tenant, you can waive the application fee if they bring the application in with the $1,000 holding fee.

The Lease

The lease itself is the meat and potatoes of the landlord/tenant relationship. It should list the start and stop times, deposit amount, all occupants and a bunch of other legal clauses. You want to use a common lease that is available to most landlords in your area. Do not have your own lawyer draft a lease. It will be too expensive and be a bunch of legal mumbo jumbo.

Use a lease that judges in your area are familiar with. In Minnesota, the Minnesota Multi Family Housing Association (MMHA) has a standard lease that can be used. You can then add your own clauses and season to taste.  My leases are seven pages long, not counting the addendums. It is twelve or thirteen pages long with addendums, depending on whether or not they have a pet. All pages are signed or initialed.

Tip 1: If your lease is in editable form, pre-highlight the tenant initial and signature areas with yellow in the document itself, so it will be there after you print, every time.

Tip 2: Have a definite move out time in your lease.  Mine say 10:00 a.m. move out required on the last day, similar to a motel. That way you have time to turn the unit.

Tip 3: My favorite add-on lease clauses are here.

53. CRIMINAL RECORD. If any RESIDENTS criminal record changes, or if additional charges not known about, or not disclosed at the time of approval appear, MANAGEMENT has the right to evict as a violation of the lease terms.

55. MINIMUM CHARGES FOR REPAIRS _______________ (Initials). There will be a minimum charge for damages that are not repaired by RESIDENT before last day of lease.  Actual charges may exceed these minimum charges. Broken Windows $75 ea; Range cleaning $200 ea.; Refrigerator cleaning $100 ea.; Burned out bulbs $5 ea;  Torn Shades $10 ea; General apt. Cleaning $550;  Clogged toilets, $100; Carpet cleaning, $150; Missing keys, $5 ea; Broken mini-blinds $25; Broken vertical-blinds $50; Couch/Loveseat removal $50; Mattress/Box spring removal $45 each piece; Nuisance calls, $50; Maintenance/repair labor $65.00 per hour; Cleaning labor, $40.00 per hr.  On-site Storage, $200 per month. Lease termination fee, 2 months’ rent; lease re-marketing fee for early move outs $50% of one month’s rent.

The Pet Addendum

The pet addendum lists the pets that are allowed on the property. You may charge additional rent for a pet. I charge $25 a month for a dog. If you do not allow pets, that is your call, but over 95% of tenants have one sort of pet or another.

Related: The Top 8 Mistakes Made By Rookie Landlords

Tip: Many insurance companies do not allow certain breeds of dogs; make sure you find out if you have any restrictions with your own policy.

The Key Receipt

Note what keys you give your tenants upon move in. There are house keys, security door keys, mailbox keys, etc. Every key you give your tenant must be returned, or paid for. I charge $5 for a lost key. I also list on this form how many garage door openers that the tenant received and if I supplied a shower curtain. You can even put the key code on the form in case you need to get additional keys without a key to start with. In my case, I stamp all keys with a key code. If I need to go to the property and bring a key, I know what key to bring.

Tip: Always supply a shower curtain and a roll of toilet paper in each bathroom. It makes for better showings and marketing pictures.

Other Legal Addendums and Disclosures

There are many state and federal required addendums. Be sure to inquire about which ones you are required to use. Some of the more common ones are lead paint, radon, drug free/crime free and HOA Addendums.

Tip: Have all addendums filled out for all of your rentals, even if they are not required. It doesn’t hurt to have a lead based paint addendum signed for your property built after 1978. But if you have multiple properties, you could miss that addendum on your property built in 1965 and have a problem.

What are your most common forms? If you are a tenant, what forms did you sign when you signed a lease?

Don’t forget to leave your comments below!

Email *
  



{ 14 comments… read them below or add one }

Russell Mattson September 3, 2014 at 12:28 pm

In Wisconsin we are required to provide smoke detectors as well as inform tenants that they must report problems with detectors to the peoperty owner within 5 days. We install a new battery in front of the tenant during lease signing/check-in. Then on the form the tenant signs it states a.) they must notify us of problems within 5 days b.) The new battery install date c.) The tenant is reswponsible for changing batteries throughout their lease.

We also require the tenants to sign a form agreeinng that they must carry renters insurance as well as provide us a copy of their declarations page as proof.

Reply

eric September 3, 2014 at 9:09 pm

Thank you for the comment!

There are many forms that are great prfotections and notificatiions. Yours are great ones!

Reply

Jonna Weber September 4, 2014 at 10:37 pm

I like the add on clauses, especially outlining what you are going to charge for repairs. Thanks for the tip!

Reply

Eric September 5, 2014 at 6:09 am

Thank you! I keep the charges high, so that the tenants do it themselves. Or huire a company. No different than when you get a quote for car repair.

Reply

Kalen Bruce September 8, 2014 at 6:53 am

Thanks for the tips on the lease! I really need to start doing the holding agreement. I like the idea of it.

Reply

Eric September 8, 2014 at 3:27 pm

Thank you for the comment! You can download the forms on my own blog.

Reply

jim September 8, 2014 at 1:03 pm

I like the idea of the minimum charges, but I’ve got a couple questions.

Has that held up in court?

What if the actual cost is less than the minimum charge? DO you still charge the higher minimum? Does this stand up in court?

Reply

Eric September 8, 2014 at 3:30 pm

Thank you for the comment!

I have been to court a couple of times, and have never had an issue. But the charges were never specifically addressed. The tenant has the option to take care of the charges aheadf of time, or pay what they have already agreed to. Much like a dealership when you bring your car in.

Lately, with my better tenant profile, I have been giving 100% of the deposit back.

Reply

John C September 11, 2014 at 11:47 am

I LOVE the idea of spelling out the charges for damages, especially for the ones that are most likely to occur. The strategy of setting those relatively high (but not unreasonably high) in order to encourage tenants to fix such things themselves sounds like a really good idea, I will have to implement that in the future.

Reply

Eric September 11, 2014 at 6:10 pm

Thanks for the comment!

No different than a car dealer. You get an estimate, you agree to pay, you pay. Failure to pay is a bad deal.

Reply

Frankie Woods September 16, 2014 at 12:19 am

Eric, enjoyed the article. I thought I had most of these down, but “The Key Receipt” and “Other Legal Addendums and Disclosures” were great additons to my armor! Thank you!

Reply

Eric September 16, 2014 at 7:11 am

Thank you for the comment!

As always, I am glad to help. If you need any forms, I have them available for download on my blog site.

Reply

John Roll September 19, 2014 at 10:59 pm

Eric this is good stuff – I’m definitely adding costs for common repair items to my standard lease.

One thing I don’t understand – last sentence of the Holding Fee section: “If you sign a lease too early or neglect to get a holding fee, you are opening yourself up to additional risk.”

By “too early” do you mean signing a lease too far ahead of the date the lease actually begins, with the additional risk being an empty house with no rent? Thanks!

Reply

Eric September 20, 2014 at 6:19 am

Thank you for the comment!

If you sign a lease too early, you run the risk of having one rental, and two renters. If you do not get a holding fee, you run the risk of losing the renter, and have an additional month of vacancy.

Or worse, you lose the renter, and take the next one who wants to rent as you need the money so bad. That is what happens often anyway, landlords cannot take the vacancy hit, so they take a bad tenant and wind up with the eviction hit.

Reply

Leave a Comment

Comment Policy:

• Use your real name and only your name in the field designated for your name.
• No keywords allowed as anchor text in the name or comment fields.
• No signature links allowed under your comments
• You may use links in the body of your comment, but it must be relevant to the discussion at hand, and not merely be some promotional link.
• We will have NO reservations about deleting your content if we feel you are posting merely to get a link without adding value to our discussion.
If you add value, but still post keywords, we'll use your comment, but remove your link and keywords.
• For more information about acceptable practice, see our site rules.

Want your photo to appear next to your comments? Set up your Gravatar today.

Previous post:

Next post: