Lease Agreement Clauses

4 Replies

Hello Everyone,

I am new to BiggerPockets and just got my first property and want to have it up on the market in about 2 weeks. It is actually my first rental property and have no prior experience with lease agreements. I've been reading up on a lot of the other posts but still have no conclusive answer related to where the lease agreements are obtained from and how to guarantee everything that should be on there is in fact on it.

The property I have obtained is a 3 bedroom 1.5 bath and I’m hoping to rent it out for $1,200 a month so what type of clauses are typically set for this type of property?

For example, what is the maximum number of occupants living in the property? I'd say a good number is 5 but again, the answer is so open and being my first property I'd like some insight on what's a good number and whether something should be allowed or not. I will break my post into 2 sections.

Part 1 contains questions that I answer myself but I’m not certain whether my answer is what’s conventional or what you guys do in your properties. So if our answers differ, I’d like to know where and how.

Part 2 focuses more on additional clauses that should be mentioned in the contract. I’d like the contract to be complete to protect myself. The goal of part 2 is to get more clauses that haven’t been mentioned.

Overall, I’d like to obtain a lease agreement (contract) where everything here has been included and even more clauses that I haven’t though of as well.

Part 1: Please provide feedback on answers I’ve given if not wise.

1. Maximum occupants living in household? 5. 2. Security deposit? Michigan rent is 1.5x as rent, so should I max it out? 3. Smoking allowed in household? No. 4.  Pets allowed? No. 5.  How much should late fees cost? 10% of rent for 1-5 days. 6. What happens if they get to the 6th day and still no rent? I'm thinking this is where I specify I have the power to evict but is 6 days too little or too much? 7. Guests allowed? Only if it doesn't surpass 5 people living within household and all other clauses within contract are followed (i.e no smoking, etc). 8. Fixed least contract time? 1 year. Is more years better though, assuming they're interested in having it leased for 2 years or more and they qualify all requirements of course. 9. Washer, Dryer, and Stove provided but what happens if they stop working? Tenant to take good care of provided appliances and have them working, even if replaced by the time the lease terminates. 10. Should tenants have renters insurance? If they want to but specify that even if they don't, landlord isn't responsible for lost possessions.  11. Should home business be allowed? I've read no, but why is not a good idea? 12. First rent and last rent? Same as monthly, $1,200 or what's the protocol for this?

Part 2: Other things that need to be mentioned in contract that seem more obvious (hopefully less debatable):

1. Tenants pay for water, gas and electricity 2. Tenants responsible for mowing front yard and plowing snow. 3. Renting the property in "As Is" condition meaning they have approved of the unit themselves and I will not do any "Upgrades" to the property. This doesn't mean I wont fix the A/C if it goes out, but it does mean they are not allowed to complain that there is not a garbage disposal or screen door. 4. No crime activity allowed and will result in eviction. 5. Monthly rent is $1,200 and due date. 5. Landlords are not responsible for any fines that the tenant receives. All fines will be taken care of by the tenant immediately. Landlord using Tenants Security deposit will pay any fines not paid by the tenants on move out. A processing fee to equal to the total fine (including fees, penalties and any other charges) will also be taken out to compensate the landlord for handling. 6. Security deposit can be used for damages on the property that are not ordinary. It can also be kept by landlord in case of eviction for tenant not paying for rent. Security deposit money cannot be used to cover monthly rent. If cleared and property appears in good conditions as expected, security deposit money should be returned within the first week after contract terminates. 7. Pest Control is the tenant’s responsibility with the exception of termites. 8. Landlord should have the right to visit the property if giving notice 48 hours in advanced. 9. Landlord has the right to be doing quarterly inspections to insure everything is in good working order. This is your opportunity to also insure the tenant has not violated any lease clauses 10. Tenants shall be responsible for: replacing their own light bulbs 11. Landlord responsible for maintenance of property. 12. Cannot paint walls without consent or it will result in a $5,000 fine. 13.  Rent payments to be done using Cozy only. 14. Communication only via email unless it’s an emergency.

So to conclude, what lease agreement contains all of these clauses and perhaps even more items that I have missed. There are Michigan specific laws and there is a large document I can read to learn more about them but I'm sure it is not efficient to write the contract myself. 

Please help with answering the suggested answers so I know where I went wrong in part 1 and any additional clauses that need to be included in part 2.

I am aware BiggerPockets does contain contracts specific to each state but how much in detail are they i.e do they cover everything I've mentioned and perhaps even more things I haven't thought about yet? Also, the lease has to contain a bunch of fill in the blanks to make sure it's filled in properly.

Thank you for the help everyone (:

Ask your real estate broker for an MLS lease form--that's a start. A lease will usually evolve over time, because we learn so many wonderful lessons and life experiences from our tenants.

You'll have to learn a bit as you go; for example, you cannot discriminate against smokers, however you can designate your property a non-smoking area.

Oh, btw, you should check with your local zoning/code enforcement office.  Normally no more than 2 persons per bedroom, but check your local laws.

Good luck to you on the great adventure!

I would highly recommend the bigger pockets book on managing rental properties. It will answer most of your questions, along with those questions you don’t know you have yet.

It also comes with example lease and addendum documents. Remember your lease is important, but so is screening, advertising, and everything else you’re doing

Also be sure to read your landlord tenant laws. Every state has its own peculiarities and you want to be sure you’re following the law. Nolo.org does a great job summarizing state laws.

Good luck!