Landlords: Protect Yourself 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.
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Here are 6 types of forms I find crucial to every rental.
1. 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.
2. 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.
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.
3. 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.
4. 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.
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.
5. 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.
6. 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.
[Editor’s Note: We are republishing this article to help landlords who have found BiggerPockets more recently.]
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!