Leases, better to have or not?

Question

I have four single family homes and have been renting them out without a lease.  I started when I was 22 and I got some advice from my uncle who is a lawyer who said that "a lease gives the tenant too many rights, you're better off without one".  As I get older, I'm starting to wonder if that's a wise way to go.

What are your experiences with leases and what makes for a good lease or a bad lease.  I will be retiring from my job soon (gotta love government employment) and will be taking a more active role in my properties than before and want to better organize what I have.

Thanks!

John Underwood · Answer

@Jim,

Leases give you a lot of rights. If you go to court the judge is going to say what did you both agree to, let me see your lease.

It also defines expectations to the tenants and what is acceptable and unacceptable behavior.

It defines how much the rent is and how much deposit you are holding.

It tells the tenant when the rent is late and how much the late fee is.

It provides for rules on pets and guests and not running a business out of your property.

I have the "5 day notice" in my lease so that I don;t have to send them one if they are late so that I can immediately file an eviction once they are late if I choose to.

I could go on, but I think you get the point.

Marcia Maynard · Answer

You certainly need a written agreement that is well written and compliant with the laws for your jurisdiction.

Some prefer a fixed term lease, but we prefer a month-to-month rental agreement. The MTM agreement is a type of lease that makes the rental period a  month at a time and continues until one party or the other gives proper notice to terminate it.

A well design written agreement will protect both the landlord and the tenant and make enforcement of your rental terms easier. It will also serve to legally protect your interests.

Jim Bryant · Answer

Well I had something in writing, but not a straight up lease.  I'll go ahead and tell Uncle Dick that one there, Nate.

He wasn't really giving legal advice, he mostly handles wills and the like.  Thanks for the help, but no need to be rude.

Andrew B. · Answer

Never write a lease yourself. You need an attorney who understands your local landlord/tenant laws, because regulations vary from state to state. To save money, you can get a lease online and then ask a attorney to review it and bring it in line with your local regulations. BP has leases for sale, and I believe they have different ones for each state, but I would still pay a couple hundred to run it by an attorney.

Nathan Gesner · Answer

Your uncle is probably not a very good attorney. He may have made a good living for himself, but he sucks at giving legal advice.

The lease does offer some protections for the tenant, but they're basically the same protections you would offer as a decent, honest human being. For example, you agree to keep the home in good working order. You agree to not enter the home without proper notice and a good reason. That's basic human decency.

The lease really offers protection for you as the Landlord. When does the tenant pay rent? How much? What does he pay for a deposit and what happens with it? Who's responsible for mowing the lawn? What happens if the tenant leaves early?

There are a hundred different protections in a good lease. If you ever end up in court, a he-said/she-said is probably going to work in favor of the tenant.

Should you do month-to-month or a one-year? I can give plenty of good reasons why a one-year lease is better and more lucrative but it depends on your state. If it's hard to evict a tenant, then a month-to-month simplifies things because you can get rid of a bad tenant by issuing a 30-day notice (assuming they honor it and leave). You have to know your laws and make the decision for yourself.

Jim Bryant · Answer

Ok thanks for the inputs guys.  I was thinking I'll probably go ahead and create a lease then.  Did you guys get them drafted by professionals or did you do it yourself?

I've had pretty good luck so far with tenants, but we did have to evict one guy.  The absence of a lease didn't hurt us in that situation, although as I read, tenants rarely contest evictions.

Andrew B. · Answer

You and your uncle are both wrong in your belief that you do not have leases with your tenants. Acceptance of rent constitutes a legally binding ORAL lease agreement. Failure to memorialize the contract in writing does not remove any of your obligations to the tenant, however, absent a written agreement the "rules" of your lease will default to state law. This means you have almost no recourse should tenant do something that you don't want them too. By creating a written lease agreement, you give yourself the ability to create restrictions on the tenant to protect your investment. This does not need to be a yearly lease.

contract law will vary state to state, but I do doubt any state deviates much from the above. You should consult your local landlord tenant laws to truly understand your rights and obligations.

Chris Masons · Answer

@Jim Bryant As much as you are concerned about tenant rights think of the lease as protecting YOU and what is allowed and not allowed...

thx,

Chris

Leases, better to have or not?

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