Why Rental Agreements Beat Handshakes

While I like the idea of confirming an agreement with a handshake rather than a contract, I’ve seen a few too many handshakes turn into fisticuffs to recommend them, especially when the agreement involves an asset worth several hundred thousand dollars. This week’s column is dedicated to answering questions from a reader about how to minimize the paperwork involved in renting your property, or more to the point, why you shouldn’t.

The reader asked, “What is the minimum paperwork (contract) a landlord should have a tenant sign? What should be included in the contract? How important is it to have a contract? What are the legalities? What if no contract has been signed?”

Given the value of the property you’re allowing a tenant to use, I’d rather focus on all the things a lease agreement should include, rather than figuring out the minimum contract you can get away with. While the law doesn’t require a contract when leasing for less than a year, why wouldn’t you protect your asset?

Our lease agreements include provisions that cover the following:

  • Property address
  • Term of agreement (when it starts and ends)
  • Cost of rent
  • Who pays which utilities
  • What the property will be used for and by whom
  • Whether pets are allowed
  • In a multi-unit property, what the house rules are (e.g., noise, parking, etc.)
  • Adhering to state and federal laws
  • The tenant’s responsibility for the actions of guests
  • Whether the tenant is allowed to sublet
  • If the tenant stays past the end date of the contract, that the contract remains in force
  • Who is responsible for what maintenance and repairs
  • Whether the tenant is allowed to alter the property (e.g., paint, renovations)
  • Clarification of who is responsible for damages
  • Under what circumstances the landlord may enter the property (how much notice, etc.)
  • A prohibition on the tenant re-keying the property without approval
  • A prohibition on tampering with smoke and carbon monoxide detectors
  • Clarification that the tenant must insure his own personal property
  • What happens if the landlord does not deliver possession of the property, as promised
  • A prohibition on having illegal drugs in any form on the property (including medical marijuana)
  • What happens if either the tenant or the landlord does not live up to his or her end of the agreement
  • What happens if a tenant only moves half way out: vacates the premises but leaves enough personal property that it isn’t clear whether the property is occupied
  • Clarification that the tenant can expect his or her personal information to be used to run a credit report
  • What happens to the security deposit, and that it cannot be used as the last month’s rent
  • A clause about attorney’s fees stating that the prevailing party pays for legal fees up to $1,000
  • A standard waiver stating that if part of the lease becomes unenforceable, only that clause is void—the rest of the agreement remains intact
  • Notification of legal notices: where to send them and how (e.g., certified mail)
  • Clarification that if the landlord waives a right, it is only that right that time (allowing your old dog to move in with you does not permit you to adopt a wild puppy when your old dog passes away)
  • Megan’s Law Disclosure: a notice stating you can go online to determine if any sex offenders live nearby (UPD has a program called Nixle that will send you notices about all kinds of interesting safety and law enforcement facts—at ukiahpolice.com)
  • The procedure required to terminate the contract

I’ll share information about addendums next time.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.