3 Common Mistakes Landlords Make During Lease Signing & Move-In

by | BiggerPockets.com

It’s time for our next look into the mistakes and mess-ups of the property management world!

Today, we’re looking at leases and lease signing, as well as the actual moving in part of the tenancy process. Let’s jump right in:

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Leases: Avoid ALL The Headaches!

Probably the single most important document you can pay attention to in terms of sidestepping headaches, the lease is also the easiest one to mess up. We shudder every time we take over a leased property and we get a two or three page leases — there’s no way such a short lease covers enough!

We started out years ago with a six-page lease and due to lessons “taught” to us by tenants, it’s now almost 20 pages long.

There are a lot of parts to a lease that need your careful eye:

  • Parties and Premises: Defines who the lease applies to and what property the lease is about.
  • Term: Enumerates specific move-in & vacate dates, as well as how often the lease will need to be renewed.
  • Rent: How much will it be? When is it due? How often can it be raised (and by how much)? What are the consequences for late or non-payment?
  • Deposits: This could include security, pet and first/last month’s rent.
  • Fees: There are a lot of potential fees, including abandonment, late payment, screening, holding, NSF check, rules violation and more. Be careful because many states are implementing pretty strict rules about what can and cannot be charged to a tenant or prospect.
  • Repairs: Spell out in detail what the tenant is responsible for, and be ready and able to deal with anything else that pops up. Don’t forget to include pests and pest control here if you’re not going to give that its own section!
  • Utilities: Similar to “repairs,” if you expect the tenant to pay a utility bill, you need to lay it out in detail in the rental agreement. No assumptions!
  • Renter’s Insurance: If you’re going to require the renter to get renter’s insurance, put that in the lease, along with minimum coverages and that you must be named as additionally insured.
  • Right of Entry: Tell the tenant exactly how much advance notice you will give them before you walk into their home. Many states have laws about this as well, so know what your minimums are (usually 24 hours) before they sign the lease.
  • Modifications: You can either make a specific list of modifications that the renter is allowed to make or a list of what they are NOT allowed to modify — though the first list is generally much safer. Tenants are creative, especially when it comes to making changes to your property if they think they can get away with it.
  • Pets: This is another section where it’s best to be very narrow and put in a clause including penalties for unauthorized pets.
  • Regulations: This includes any other rules of the property, from parking restrictions to lawn watering times to quiet times and beyond, and it needs to be detailed in the lease as well.

There are dozens of stories we could tell about every one of those bullet points and how they’ve ALL gone horribly wrong for us at one point or another — but that would take pages and pages. Rather than lay out all of those mistakes for you, we’ll just say that not going over your lease with a fine-toothed comb and magnifying glass is the single worst — and most common — mistake property managers make, period.

Related: 6 Common Application & Screening Mistakes Property Managers Make

Do it, and do it carefully, and you’ll save yourself a mountain of trouble in the long run.

3 Common Lease Signing & Move-In Mistakes Landlords Make

1. Lease Signing Mistake: Proceeding When Tenant is Short on Move-In Funds

Of course, the above will not completely bulletproof your lease signing and move-in process.

You also have the wonderful ability to completely screw yourself over by letting a prospect move in owing a balance for the rent + security deposit. Don’t do it!

Every so often, we have someone who wants to move in, but doesn’t have all the required funds. They always want to work out a deal to pay the balance on their next payday or pay it over the next 2-3 months. What type of tenant knows they have to move, knows how much money they need, yet can’t come up with it when they need to move? Not one who’s going to make a strong effort to pay the rent on time each month!

2. Move-In Mistake: Failing the Checklist Inspection

It doesn’t matter how thoroughly you cleaned up, repaired, and renovated the property since the last tenant moved out — nothing is ever perfect.

Related: The Top 8 Mistakes Made By Rookie Landlords

If you don’t go through the property with a video camera, a still camera, a pen and paper, and a determination to document the condition of the property, you’re opening yourself up for a big fight when it comes time to refund the security/cleaning deposit. You need to be able to prove, in court if necessary, that the water damage wasn’t there in January, that the bathroom windows could open last Spring, and so on.

3. Move-In Mistake: Releasing The Keys Too Soon

This should be obvious, and yet it happens with surprising regularity: don’t ever give the keys to someone until their background check has come back clean, they’ve paid all of their funds, and the lease agreement is signed.

Letting someone who isn’t paid up, clean, and signed on into your property is just begging for any of several dozen problems, some legal and some “merely” very, very expensive.

There’s a lot more on the way — we’re only halfway through the list of potential mistakes landlords can make! Keep looking right here for more.

What mistakes have you made (and learned from) during the lease signing and move-in process?

Tell me your stories below!

About Author

Drew Sygit

While in the mortgage business, Drew rose to a VP position at the first broker he worked for and then started his own company. In the pursuit of excellence, he obtained several mortgage designations and joined mortgage & several affiliate association Boards. He also did WebX presentations and public speaking. It was during this time he started personally investing in single-family rentals, leading him to also start Royal Rose Property Management with two partners. He also joined the Board of a local real estate investors association, eventually becoming its President. The real estate crash led to an offer from the banking industry to manage a Michigan bank’s failed bank assets they acquired from the FDIC. The bank acquired four failed banks from the FDIC, increasing from $100M in assets to over $2B while he was there. After that, he took over as President of Royal Rose Property Management. Today, he speaks at national property management conventions and does WebX presentations.


      • Taylor McClung on

        We accept personal checks for the application fee. My logic is that if that bounces, we can easily deny them. First month’s rent and security deposit is required to be a cashier’s check. Then it goes to personal checks. I rent in the B class apartments, so I’m not overly worried about checks bouncing. So far, so good (3 years).

        • Drew Sygit

          @TAYLOR: totally agree about the personal checks for application fees! If they bounce that, they better have a FANTASTIC excuse.

  1. Richard Guzman on

    Wow! Amazing article thank you!
    This is what I needed to know – I was just going to use a old rental lease I had from years ago when I was renting and run it by a real estate lawyer for his blessings! You bring up some good points that I value very much!!!

    • Drew Sygit

      GUZMAN: thanks for the positive feedback:) Just be careful relying on attorneys, despite their attitudes, they rarely know as much as they’d like you to think they know. Our attorney has copied some of our lease clauses!

      • I would very rarely rely on an attorney. In California in order to negotiate rentals it either has to be your personally owned property or you have to be a licensed real estate sales person. They are typically much more well versed at the needs of property owners looking to rent than are attorneys….it’s their specialty.

        • Drew Sygit

          @ROB: the best person to negotiate or create a lease is the person that has the most at risk — the owner or a property manager that REALLY cares.

          Owners should be very careful, and ask a lot of questions until trust is EARNED, when dealing with attorneys, real estate agents, property managers, CPA’s, etc.:)

  2. Good points!
    We NEVER take personal checks –even for the application fee–money orders or cashiers checks ONLY.-all rents are paid the same way– this means NO bounced checks!

    Never allow someone occupancy if they do NOT have check in monies IN FULL –you will end up being owed money & it sets a bad precedent with a new renter.

    DOCUMENT the check in with a time dated video check in–we do video check ins with the new tenants ON CAMERA in each room fully documenting the condition when they are handed the keys — this saves a world of headache when they move out ! You also have something that REALLY stands up in court , and best of all, the tenant KNOWS you have a video !

    • Drew Sygit

      JOANN: thanks for contributing! We’ll take personal checks for amounts under $50 or so, really depends on the property area and demographics. We also video tenants doing their inspection – just be sure they give you permission on the video to use the video “as you see fit”.

  3. Learned from our own mistakes, paid the price. On top.of everything mentioned in this article, we also insist that they turn the utility accounts to the tenant’s name before we release the key!

    • Drew Sygit

      SCPP: ouch! Always cheaper & faster to learn from the mistakes of others:) Thanks for adding the great point about utilities. Of course you could also add a lease clause that states you can bill the tenant for the utilities PLUS a Processing Fee each month!

  4. The best thing you can do as a Landlord is screen prospective tenant’s thoroughly. In some cases, these individuals may owe money to other landlords. If they do… don’t rent to them! Not only is it ethically looked down upon to do so, who’s to say they won’t do the same to you?

    In addition, if you feel good about the individual who owes money elsewhere, force them to set up an agreement with the owed Landlord. If they are willing to do so (and you can verify it) chances are you’re dealing with a responsible tenant who may have fallen on hard circumstances.

  5. Kelly B.

    I get a copy of their drivers license, that way you know they are who they claim to be and see if their claimed address matches up with the one on their license. Also, when I hand them the application, I tell them the info they write down needs to matchup with the background check we do or they automatically get disqualified. Knowing we’re serious, many people don’t return the application, keeping us from wasting time/money. Sometimes they even verbally disclose things we would not have discovered.

    • Drew Sygit

      KELLY: we also get a copy of drivers licenses (DL) as some code enforcement departments will ticket then tenant instead of the landlord or owner if you have a DL.

      Be sure to also cross reference addresses on paystubs & bank statements, It’s interesting how many different addresses some tenants will have – and the stories as to why!

      Thanks for sharing!

  6. Talked with Drew by phone.
    Impressive operation, way out of my league. He was generous and gave suggestions to help. He offered to trade but I have not yet come up with an in kind offer.
    He has a lot to offer and I would talk with him again. Check out his web site and read his blog there also.

  7. A great post.. All the discussion about not taking personal checks leads right into the value of introducing automated rent options as a condition of lease signing. While applicants with top credit scores may balk at the idea, millions of other future residents who know their credit scores are lacking will not. In fact, in our experience, upwards of 57% of applicants will convert using an automated rent savings plan direct from their employer when/if taking such an action can a) increase the likelihood of them being offered a lease to the rental housing they want, and b) help them move in with some cost savings in exchange for prioritizing funds from payroll before they become discretionary and can be spent on other expenses. It comes down to a point suggested in the post: how you move someone in is a critical factor in how well they do once they move in.

      • DREW,
        While we always are interested in working with new communities, my hope was really to point out the value of having a full menu of options to help different segments of the renter population. Clearly there is not a ‘one size fits all’ solution to address the varying needs of today’s renters. Technology, innovation and creative operations will pave the way to cater to differing needs. As I’m sure you’ll agree, it’s an exciting ride to be a part of.

  8. Great article. Thanks for the info, you made it easy to understand. BTW, if anyone needs to fill out a Lease Agreement form, I found a blank templates from this site PDFfiller. This site also has some tutorials on how to fill it out and a few related Real Estate forms that you might find useful. Here is a link to Residential Lease Agreement form that I was able to use http://goo.gl/fe9dtR.

  9. Interesting thread. Believe it or not, a cashier’s check can bounce.

    About 6 years ago we got scammed by a person who claimed to be in the military. Being former military, I try hard to work with military families, as I know how tough moving every three years can be. This knucklehead sent me forged travel orders. I asked for a copy of his ID and it was one excuse after another why he was delayed in sending it. Said he was in NC finishing training and his wife was in Denver. Could we help her get “settled.” OK. Picked her up from motel, took her to the house. She was supposed to give me the cashier’s check for rent and deposit. Made the mistake of not asking for the check up front. When we got to the house, she said she left her backpack at the hospital and the check was in it. Said she would get the check in the AM. Since she had checked out of the motel, I took the chance. Just trying to help. So I arranged to meet her the next day. HUGE MISTAKE. Never, ever, allow anybody to take possession until at least three days after accepting a cashier’s check. Don’t allow tenants to hand you a check and then give them keys. We sign leases as soon as the unit is rented, and the deposit must be paid at that time in certified funds. We also require first month’s rent at least 7 days in advance of move-in date.

    Anyway, one thing lead to another and three weeks later we were still not paid. I actually picked up this woman, who is legally blind and cannot drive, at the house and took her to the bank because the cashier’s check she finally gave me was no good and she refused to believe me. Turns out, she had bounced so many bad checks, that the bank took the cash she paid for my cashier’s check to cover her debts. So when I presented the check to my bank, it was refused.

    Meanwhile, I had some friends at Ft Bragg NC go pay the man a visit. They escorted him to the local Sheriff’s office. They were really glad to see him, as he had quite the scam operation going. He was promptly arrested and is still in jail today. He also was charged with impersonating a military member, forging official documents, and being a dumb-ass, and so federal charges were tacked on too.

    Meanwhile I had to evict the woman. We have only done eight evictions in 15 years of managing properties, while executing thousands of successful leases, To this day, she is the only eviction which resulted in the Sheriff having to come to the door to escort her out. I asked him if I could throw an arm bar on her and drag her down the driveway. I was only half kidding.

    As a result, I felt responsible for the mess, and I made good on the owner’s losses. The house was owned by an Air Force family. Irony right? We still manage this property today. The owners have referred many people to us over the years, because I stepped up and made it right. But trust me…you don’t want to go through something like this ever. So just be careful and never assume a cashier’s check is always good.

  10. Drew Sygit

    KEVIN: stories are always the best for examples, thanks for taking the time to share:)

    We try to NEVER rely on getting all the funds at the lease signing. Our timeline requires an approved applicant to sign our Agreement to Hold form & pay an Earnest Money Fee (EMF) (we used to call it a deposit but an ignorant judge made us pay it back after applicant broke terms of Agreement and took us to small claims court) BEFORE we’ll even generate a lease. Once the funds clear we will then setup lease signing and generate the applicable lease. Tenant could still fraud the certified check or money order we require at the lease signing, but odds are in our favor after their EMF clears.

    • Mark Bouman

      Great post Drew!

      I’m over on the West side of the Mitten in Grand Rapids 🙂

      I’m currently working on a move-in checklist/process/timeline for my first investment property.. Making sure funds have cleared through an EMF before signing the lease is a great idea that I’ll be sure to implement right away!

      Thanks for the insight!

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