Landlording & Rental Properties

Top 10 Items to Include in Your Lease Agreement

Expertise: Landlording & Rental Properties
12 Articles Written
House with "For Rent" sign in front

“Don’t rely on a handshake when it comes to lease agreements!! It is all about documentation.”

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

If you have heard me at speaking events or on podcasts, I am constantly talking about the importance of having a residential lease agreement in place and how vital it is to strictly adhere to the terms and conditions as set out in this agreement.

Full disclosure, I am not an attorney nor am I giving my advice on legal matters. It is alway suggested that you make sure your agreements comply with local, state, and federal laws by having your agreements reviewed by your own legal counsel or state regulators to ensure new and updated compliance.

Just to recap, the basic premise of a residential lease, or rental agreement, is that of the binding legal agreement between yourself and your resident. This is the blueprint of a tenancy: It lays out the rights and responsibilities of both the landlord and the residents.

It’s not only a binding contract that the parties can enforce in court; it’s also a highly practical document full of crucial business details, such as how long the residents can occupy the property, the amount of rent due each month, when it is due, and the repercussions of not adhering to the agreement.. 

To reiterate, a lease agreement is a bi-lateral contract between two parties, in this case between a landlord and a resident. What this means is that the landlord and resident have agreed to certain terms such as:

  • Agreed rental amount
  • The day the rent is due and the frequency of payment 
  • In-going condition of property
  • Ongoing maintenance & how the property it is expected to be kept during the tenancy
  • Out-going inspection & how the resident is expected to leave the property 

Key Elements of a Lease Agreement

Regardless of whether you decide to use a property management company or self-manage, I cannot recommend how vital it is to draw up a formal lease or a rental agreement. In this, you’ll want to address the following topics:

1. Names of all residents and occupants.

Every adult (person over 18 years old) who lives in the rental—including both members of a married or unmarried couple—should be named as residents and sign the lease or rental agreement. Each resident is legally responsible for paying the full amount of rent and following all other terms of the lease or rental agreement.

eental agreement form with signing hand and keys and pen

This means that if one resident skips out and fails to pay rent, you can legally seek the entire rent from any of the residents. Then, if a resident moves in an unapproved roommate or sublets the unit without your permission, you have the right to terminate the tenancy and evict all residents, if necessary.

2. Contact information.

Consider requiring residents to contact you in writing about certain matters. Although texts and instant messaging might work for some discussions, you want to be able to keep a reliable—and printable, in the event you ever need to show a judge—record of all communications with your residents.

For example, you might state that residents must request repairs in writing or give notice to terminate the tenancy by sending a letter to a designated address. If you agree to accept email, make sure that you regularly check email and have methods for saving (and backing up) everything you send and receive.

3. Description of rental.

Include the complete address of the property (including building and unit number, if applicable). You’ll also want to note any specific storage areas or parking spots that are included. For example, if the rental includes assigned parking, be sure to write in the stall or spot number. Similarly, specify areas that the residents are not allowed to access (such as a locked shed in the backyard).

4. Term of the tenancy.

Rental agreements create short-term (usually month-to-month) tenancies that renew automatically until the landlord or residents terminate. Leases, on the other hand, create tenancies that terminate after a specific term (usually a year). Whichever you use, be specific: note the start date, the tenancy length, and (if creating a lease) the expiration date.

5. Rent.

Don’t just write in the amount of rent—spell out when (typically, the first of the month) and how it’s to be paid, such as by mail to your office, online, auto-draft, ACH, etc. Make sure you comply with your state’s laws on paying rent. To avoid confusion, spell out details such as:·          

  • Acceptable payment methods (for example, personal check only)
  • Whether you charge a late rent fee, the amount of the fee, and the grace period (if any)
  • Any charges if a rent check bounces

6. Repairs and maintenance.

Your best defense against rent-withholding hassles and battles over security deposits is to clearly explain your repair and maintenance policies, including:

Man search apartments and houses online with mobile device. Holiday home rental or real estate website or application. Imaginary internet marketplace for vacation lodging or finding new home.

  • The residents’ responsibility to maintain clean and sanitary premises and to pay for any damage they cause (excluding normal wear and tear)
  • A requirement that the residents alert you to defective or dangerous conditions, with specific details on your procedures for handling complaints and repair requests
  • Restrictions on resident repairs and alterations (for example, prohibit any painting of the unit unless you approve it in writing)

Related: Rental Property Damage vs. Normal Wear & Tear: How to Tell the Difference

7. Entry to rental property.

To avoid resident claims of illegal entry or violation of privacy rights, your lease or rental agreement should clarify your right to access the rental. It’s okay (if permitted under your state’s landlord access laws) to have different policies for different situations. For example, you might provide 24 hours’ notice before you enter to make repairs or show the unit to potential renters, but you might not be able to provide advance notice in an emergency.

8. Deposits and fees.

Avoid some of the most common disputes and one of the top reasons landlords are involved in a lawsuit between landlords and residents by being very clear about security deposit disposition. (Note: I have added a sample chargeback fee sheet that you might want to have a resident sign to acknowledge the fee amounts that can be expected upon move out.) 

  • The dollar amount of the security deposit (be sure you comply with any state security deposit limit laws)
  • How you might use the deposit (for example, to cover unpaid rent or repair damage the resident causes) and how you won’t use it (for example, you won’t accept it in lieu of last month’s rent)
  • Whether you expect the resident to replenish the deposit in the event you have to make a deduction mid-tenancy (for example, if you repair a window the resident’s child throws a ball through two months into the tenancy)
  • When and how you will return the deposit and account for deductions after the resident moves out (check your state’s laws on returning security deposits)
  • Any nonrefundable fees, such as for cleaning or pets (make sure your state allows nonrefundable fees)

9. Your rules and important policies.

If a rule or regulation is so important to you that you’d want to remove a resident who violated it, be sure to include it. Other not-so-vital rules can be written in a separate rules and regulations document or addendum to have them sign and acknowledge at lease signing. Landlords commonly include the following policies in their leases and rental agreements:      

  • No illegal activity: To limit your potential liability, as well as help prevent injury to others and your property, you should include an explicit clause prohibiting illegal and disruptive behavior, such as drug dealing, drug use, and excessive noise or nuisance.
  • Smoking: You have the right to prohibit or restrict smoking of any kind in your rental. If you don’t allow smoking, you might want to note that the ban includes all forms of smoking—including marijuana or vaping. If you limit smoking, write out where and what residents may smoke.
  • Pets: You have the right to restrict or prohibit pets in your rental, with the exception of service and emotional support animals. If your rental is pet-friendly, include your pet policies. Write out how many pets a resident can have, and specify what types, breeds, and sizes of animals you allow. Also, note if pets must be on leash outside the unit or if residents must clean up pet waste in common areas or a yard.

Related: An Emotional Support Peacock—Really?! How to Navigate the Murky Waters of ESAs as a Landlord

10. Other restrictions. 

Federal, state, and local laws might require you to disclose certain information in your lease or rental agreement. For example, you might have to inform residents about lead-based paint or the unit’s bed bug history. You’ll also want to make sure your lease or rental agreement doesn’t violate any rent control laws, anti-discrimination laws, or health and safety codes.

Again, I would strongly advise having a local landlord-resident attorney review your lease or rental agreement to ensure it complies with all applicable laws.

Key Takeaways

In conclusion, even though this is not the most exciting part of owning a rental property—and while you will not likely see social media posts or videos of people excited about how they are writing their lease agreements—I will say this is the vital backbone of information that is needed to be successful as an investor and to make sure you are protecting your asset.

I would advise that once you have a policy and procedure set and in place, including all the above in your documentation will ultimately mitigate issues that can arise—making your investing life a little bit more streamlined and simple.

Questions about the above? Elements I failed to list? 

Comment below!

Steve Rozenberg is the vice president of education for Mynd Property Management. In this role, he educates investors about the benefits of small residential inves...
Read more
    Barry H. Investor from Scottsdale, AZ
    Replied 4 months ago
    STEVE - Great comprehensive article. I might add with respect to #4 and #5 above that you include automatic rent increases annually, whether it reverts to a MTM rental or remains annual. I completely remodel homes in Kansas City MO, put in above market rent tenants, and I assure they are aware of the 5% auto increase annually. The Investor/Buyers who use my Seller financing to purchase these turn key tenant-occupied homes love this lease provision as well. I also spell out security deposit deductions mid-lease very clearly as well. That is a great recommendation.
    Steve B. Investor from Centralia, IL
    Replied 4 months ago
    Great article. Thanks
    Katie Rogers from Santa Barbara, California
    Replied 4 months ago
    Not only should you check whether your state allows nonrefundable fees (many states do not), you should also check whether you are allowed to charge cleaning fees. The law in many states is that the tenant need only do cursory cleaning. A professional house cleaner can clean relatively dirty unit in a day. A house cleaner charged us $150 to clean the huge vacation home between guests. Your listed charges for both cleaning and replacements are ridiculously high, and illegal in some states. If the main point is that landlords should be specific and explicit with their leases, I heartily agree.
    Darren Sager Investor from Summit, NJ
    Replied 4 months ago
    Excellent Steve! Thanks for putting this together!
    Tilmon Shields from Louisiana
    Replied 4 months ago
    Thanks for the information.
    Camerron Cheatham Rental Property Investor from Cincinnati, OH
    Replied 4 months ago
    Great article, especially for someone like me who just purchased their 1st rental
    Brett Jones
    Replied 4 months ago
    You may also consider creating an automatic increase if the tenant does not notify you 30 days in advance and let’s the lease go month to month. This allows you to always have a proper lease in place, with enforceable increase opportunities.
    Katie Rogers from Santa Barbara, California
    Replied 4 months ago
    in my experience, it is best to put every tenant on a month-to-month from the outset.
    Don Ireland from Holts Summit, Missouri
    Replied 4 months ago
    I think everyone should look at their own local laws before making this decision. When I lived in NJ about 15 years ago, a LL couldn't terminate a rental agreement (even MTM) without "just cause". So having a MTM is basically one sided: the tenant is allowed to terminate the agreement but the LL is not. I doubt it, but they may have changed that law since I lived there.
    Katie Rogers from Santa Barbara, California
    Replied 4 months ago
    You don't think a landlord should have to have a good reason for for terminating a rental agreement?
    Miranda Paton
    Replied 4 months ago
    States with Rent Control laws (I'm most familiar with things in Oregon) limit the "good reasons" a landlord has for terminating a lease or a rental agreement. Of course landlords would like the right to terminate leases at will.
    Jennifer Rysdam Rental Property Investor from Luverne, MN
    Replied 4 months ago
    In my experience it depends on where you live. I'm in MN and have had more than one tenant move out in the middle of winter. Nothing like having a unit sit empty for 6 months during the down season. I'll be putting all of my month to month on year leases this summer.
    Jeffrey Jinks
    Replied 4 months ago
    Thanks for the article. As legal counsel, I might add that you get a copy of the tenant's drivers license or state issued ID to confirm the ACTUAL legal name. We've seen many occasions where people's legal name is different from what they initially provided. One client actually admitted his given legal name was not his married name during a Will signing and his wife of many years was so upset she actually left the office. JJJ
    Miranda Paton
    Replied 4 months ago
    A quick question: Do you ask for that and a very complete rental application (employer's contact info, SSN) because you'd need that for any collections purposes? Or do you just need that for the initial credit check. I ask because I bought a property, inherited some tenants with it, but did not get a rental application from them. It seemed fussy, but I made them do that after the fact so that I'd have that info. Did I need it? Thanks.
    Michael Casile
    Replied 4 months ago
    Great article. I'm in compliance w/most of it, but it definitely provides some food for thought for modifications to my lease.
    Rebeca Guaty Borges from Miami, Florida
    Replied 4 months ago
    Thanks for the amazing article. Very thorough and detailed. Also loved Barry H idea of including 5% annual increase!!
    Miranda Paton
    Replied 4 months ago
    I have signed a few agreements (leases, but also horse boarding agreements) that specified the *potential* for an annual increase. It named the amount (in this example, up to 5%, but not necessarily so) and named the month that would happen (for leases, this was usually 12 months from the move-in time. For horse boarding agreements and/or month-to-month rental agreements, it worked well to pick a month (January or June or whatever). This lets the tenant budget and/or if he can see that he won't be able to afford to stay in your place, he knows when he'll likely have to plan on moving. And that, in turn, lets him give you notice. People who get bad surprises behave badly. Don't put your tenants into this position; it will end up costing you money. In my experience, the most risk for lost money happens during a move-out.
    Heshel Mangel
    Replied 4 months ago
    Great article! Do you have a template for a lease-agreement based on the above provisions? Thanks!
    Kevin McLaughlin from Houston, Texas
    Replied 4 months ago
    It will vary based on the state you are in. So a Google search leads me to the Texas Standard Residential Lease Agreement which, when I get to that point, I will modify to incorporate additional provisions.
    Larry Eskridge
    Replied 4 months ago
    Steve , a good article . it defines what management will tolerate as well as will protect the investment property for landlord and future tenants .
    Miranda Paton
    Replied 4 months ago
    Great article. In my experience, most leases legal for your state (that you can buy at a local office supply store) will have many of these clauses written in. A couple of additional details for you all to consider: 1. I have not seen all states allow every tenant to be held responsible for the rent, even if one bails. I believe the language for names the tenants and then calls them "collectively and severally responsible" for the rent. Or, rather, I have seen that language in New York state leases, but not in Oregon leases. Both kinds of leases were in college towns where unrelated roommates (and those moving in and out) were common. I'm not sure what Oregon allows, without that New York state language, but the point is that landlords would do well to see how this is handled in their state. Also, it works well to have the tenants choose one representative among the group-- this is the person who will write the rent check each month, and from whom you collect the group's deposits This is the single person to whom you will return any cleaning deposits, with the roomies working it out amongst themselves who gets what back. It's the one person you communicate with about maintenance, etc. Choosing a single point person simplifies things for the property manager and sets up a professional expectation of professionalism and organization for the tenants. 2. People's definition of "clean" differs a great deal! It helps to give tenants a copy of the move-in/move-out inspection sheet with the lease and when they give notice. That way, they know what you will look for and they have a cleaning check-list to work from as they prepare to leave the property and hope to get their cleaning deposit back. In Oregon, if you keep back any of the cleaning deposit, you must provide an accounting of that. Your list will help you and your tenant see where those charges come from. That cleaning costs list offered here is a nice template. Also, giving tenants that cleaning list at the first, with the lease, helps them walk through and find anything dirty or needing repair that they'll want you to fix or not hold them responsible for improving. It's important for landlords with not-new properties to acknowledge, with tenants, any signs of wear (say, not newly-replaced but professionally cleaned) carpet that the tenant walks in with. My leases give tenants 30 days to bring any of these "inherited" problems to my attention. if they don't do that, I'm going to assume that any damages or excessive wear I see happened during their tenancy. Also, way too many of us (myself included) don't spend enough time really inspecting our own properties. Every chance you have to walk through and look at your rental is helpful to you!
    Katie Rogers from Santa Barbara, California
    Replied 4 months ago
    If a landlord is renting to students by the room, it is better to hold each tenant separately responsible for their own rent and deposit. It is not fair to make other tenants responsible for housemates they did not choose. I do see a problem if there is damage to a common area and each and every tenant says, "I didn't do it."
    Bryan Scott Real Estate Broker from Castle Rock, CO
    Replied 3 months ago
    To dovetail off of what @Miranda Paton said concerning "inherited" problems, once the property condition is formally accepted by the tenant(s) within the first 30 days, it goes to regular operations mode, which means they cover repairs for any single event up to $300. In other words, you (the tenant) broke it, you fix it.
    Katie Rogers from Santa Barbara, California
    Replied 3 months ago
    So if the shower valve (which is located INSIDE the wall) breaks, and it costs less than $300 to fix it (true story), that would be on the tenant?