Chapter 4

How to Customize Rules in Your Rental Lease

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The Complete Guide to Rental Leases

 

Customize Your Rental Leases

Our online rental lease is simple to customize. You can easily enter and edit information in your lease. In this chapter, we’ll focus on how to customize your lease in two important ways:

  1. Customizing your rental terms
  2. Customizing your rules

Rental Terms on Your Lease 

Rental terms are specific for each tenancy, meaning you’ll need to update these terms every time you sign a new lease. They include:

Tenants’ Names

Everyone in the unit needs to be listed on the lease, including minors.

Lease Term

Terms can be six months, twelve months, or month-to-month, etc.

Lease dates

Enter the start date when the lease becomes effective and the end date when the lease will expire.

Rent Details

State the monthly rent price, the due date, the amount of the late fee, what day the late fee is legally applicable (several states have a five-day grace period), and instructions for how to pay rent.

Security Deposit

List the deposit amount, where it’s being stored, if interest is owed, and how it will be returned.

Co-signer

Input the co-signer’s name, contact information, and have him or her sign. Learn how to screen a rental co-signer here.

Maximum Occupancy

Mention the maximum occupancy for the unit. State laws typically require that you allow two people per bedroom. Everyone living in the unit should be accounted for on the lease.

Pets

State whether pets are allowed and the pet’s information if there will be a pet in the unit.

Additional Fees

List any additional fees, such as move-in fees, pet fees, or pet deposits.

Utilities

Let tenants know which utilities they are responsible for setting up. If you need help figuring out how to handle utilities, check out our article on who should pay for utilities.

Maintenance Protocol

Inform tenants how to contact you for maintenance issues and provide a phone number in case of emergencies. Mention what to do in the case of a lock-out.

Important Rules to Address in Your Rental Lease 

As a landlord, you have a lot of important decisions to make. You have to decide rules for your rental property. Your lease is your opportunity to set rules in writing for the upcoming tenancy. Here are nine important rules to address in your rental lease:

#1 Rent 

When it comes to rent, there are few important decisions for you to make. The first step is deciding your rent price, which you probably already did as you were creating your online rental listing. If you’re still not sure about your price, learn exactly how to decide your rent price.

Rent Collection Dates

Next, decide what day rent is due. Rent is traditionally collected on the first of the month. We recommend collecting rent on the first to avoid confusion because it’s the most common collection date in the rental industry. You can change the collection date if your tenants ask for a different date because of when they get paid. Some tenants might prefer to split their rent payments into two payments per month. You can customize this part of the lease based on what works for you and your tenants.

You should also tell your tenants how to pay rent. We recommend collecting rent online. Our software allows tenants to set up automatic payments so they don’t have to worry about paying every month. If you’ve been a landlord long enough, you probably know the most common reason tenants miss rent payments is due to forgetfulness. But when tenants pay online with Rentalutions, they’ll receive reminder emails. And with automatic payments, they don’t have to remember to pay rent, it will automatically go through each month.

Despite making the process easy and reminding tenants to pay, there will probably be some occasions when rent is late. You should enforce a late fee to help motivate tenants to pay on time. And if they don’t, you’ll receive your late fee to compensate for rent being late. With any rule, the best way to make the rule meaningful is to enforce it.

Most states require a grace period, which is a window of time where the tenant can pay you without penalty. A typical grace period is five days, meaning you can charge your tenant a late fee five days after the collection date. If your collection date is the first of the month, you can charge the fee on the fifth. Our software allows you to automatically charge your late fee on the day you specify.

#2 Co-signers 

A co-signer is another person on the lease who is financially responsible for payments. Co-signers are typically on the lease if the tenant is a student. We recommend having a co-signer if you want to rent to someone, but feel unsure whether he or she will be able to afford rent each month.

You should screen co-signers the same way you would screen any other tenants. They should fill out your online rental application and you should verify cosigners’ income the same way you would verify a tenant’s income.

The co-signer will need to create his or her own free Rentalutions account in order to sign the lease. Make sure the co-signer is aware of the legal and financial implications of signing the lease: he or she is jointly and severally liable, meaning he or she will be responsible for the full rent amount if the tenant does not pay.

#3 Security Deposits

Security deposits are collected once a tenant signs the lease. The security deposit has two purposes:

  1. It demonstrates the tenant’s financial responsibility because the tenant has accrued savings.
  2. It protects you in case the tenant misses a rent payment or damages the property. You can use security deposit money to make up for missed rent payments or to pay for repairs.

However, collecting a security deposit has some downsides. In most states, security deposits are heavily regulated. There are strict laws about where a landlord can keep the security deposit (typically needs to be in a separate bank account) and whether or not the landlord is required to pay interest on the deposit.

In a recent survey of our landlords, we found that the majority of landlords still collect a security deposit, but landlords in Illinois and New York are the most likely to collect both a security deposit and a move-in fee. Move-in fees are typically non-refundable and there are fewer laws regulating move-in fees, making it easier for landlords to use them without being penalized. Security deposit laws can penalize a landlord up to three times the amount of the security deposit.

Should you collect a security deposit or a move-in fee? 

We recommend collecting a move-in fee if you want to avoid the possible legal implications of handling security deposits. Whether you collect a security deposit or a move-in fee, be sure to write it in the lease what you are requiring. You should also notify tenants of all deposits and fees in your rental listing description, during your initial phone conversation with a tenant, and during the rental property showing.

When can you collect your security deposit or move-in fee? 

The rental lease agreement should be signed before you begin collecting a deposit or fee. This protects tenants so that you don’t collect these payments and then choose to rent to someone else. Everything should be signed and legal before money is exchanged. The same goes for first month’s rent.

How much can you legally charge?

Most states limit how expensive moving fees are in order to protect tenants from excessive fees. Check out chapter two to learn more about compliance with landlord-tenant laws.

You can also learn how to minimize risk when collecting security deposits. In this article, we’ll show you how to avoid violating security deposit laws, including why it’s important to provide security deposit receipts.

#4 Pets

Pet Rules in Your Rental Lease

Whether or not you allow pets in your rental property is your decision. One thing to keep in mind is that approximately 70% of tenants own a pet, according to the LA Times. By not allowing pets, you could be significantly limiting the number of tenants who are interested in your property.

Renting to tenants with pets is also an opportunity for you to make money. Many landlords charge monthly pet rent in addition to a pet deposit. That being said, pets can cause damage to a rental property, which is often why these fees exist in the first place. Pets can cause allergy issues for other tenants and can generate noise complaints. In general, if you allow dogs, remember to be consistent about your rules. You can allow certain dog sizes and breeds and not others. However, if you’re going to have rules, make sure they apply to all of your tenants, otherwise it can be construed as rental housing discrimination.

One common question we get here at Rentalutions is how to handle a tenant who doesn’t have a pet when he or she signs a lease, but then gets a pet. We recommend having a rule in your lease that requires your approval for future family pets and mentions a pet deposit or fee. That way, your approval is required and you retain your right to apply a fee if you approve of the pet.

#5 Smoking

We recommend asking about smoking in your rental application. Smoking should be a factor you consider as you’re screening tenants. You are allowed to deny a prospective tenant because of smoking.

We recommend including a rule about smoking in your lease. Some landlords don’t allow smoking anywhere on the property; others allow it on the property, but not in the building.

Keep in mind that smoking creates a fire and health hazard to other tenants. There is a high risk of property damage due to smoking from potential fires and simply the odor problem. Whatever rule you choose for smoking, remember to write it in your lease.

#6 Marijuana 

Now that marijuana is recreationally legal in some states, landlords have started to ask how to write rules about marijuana into their leases. First, let’s review where it’s legal for recreational or medical use:

Is Marijuana Legal in Your State?

Photo Illustration Courtesy of Governing.com

Similar to cigarette and cigar smoking, you are legally allowed to ban the use of marijuana on your property. There are a few aspects of marijuana use to consider. If you’ll allow:

  • Smoking in or on your property
  • Growing marijuana on your property
  • Selling marijuana on your property

There is one exception- you’re not allowed to ban medicinal marijuana.

#7 Renters Insurance

You should require renters insurance in your lease. Tenants will sometimes believe they are covered by your landlord’s insurance, but that is not true. They need to be separately insured. Renters insurance typically costs about ten dollars per month and covers thousands of dollars of damage. And remember, if your tenants have renters insurance, it reduces the chance they will sue you if something goes wrong.

Learn the reasons why renters don’t buy renters insurance and why they’re all false.

#8 Maintenance 

In your lease, you should mention how you want tenants to report maintenance issues and which types of repairs are their responsibility. Typically, if the damage is due to the tenant’s behavior, then he or she is responsible for paying for it. You should make this clear in the lease so you are not liable for unnecessary damage.

You can also mention what the tenant should avoid doing, including not putting anything down the drains. Normal maintenance issues, such as a light bulb needing replacing, are typically covered by the landlord.

Overall, good rental leases will make tenants responsible for:

  • Keeping the rental property clean
  • Reporting maintenance issues right away
  • Paying for any damage that is their fault (they can reimburse you)
  • Not altering the property significantly, i.e. repainting, rekeying locks, adding in built-in bookcases, etc.

There are two exceptions to the above rules. Disabled tenants are allowed to make reasonable alterations to the unit. And second, if a maintenance problem is making the space uninhabitable, then tenants are allowed to fix the problem and deduct it from their rent price. This is called the “repair and deduct” rule.

#9 Early Move-In 

If your tenant is moving in the middle of the month, then you may want to calculate prorated rent. In this case, you should specify in your lease what the prorated rent amount will be for that period.

To calculate prorated rent, first calculate the daily rent amount:

Daily rent amount = Total rent price / Number of Days in that month

Then multiply the daily rent amount by the number of days the tenant will be in the property that month:

Daily rent amount * Number of days tenant is in the property that month = Prorated Rent Amount

Be sure to specify collection dates, not just for monthly rent, but also for deposits and first month’s rent. You want everything to be clearly communicated in writing.

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Next Steps

Setting rules in your rental lease is a great step toward getting your perfect lease signed, but as any experienced landlord knows, not everything will go completely smoothly. It’s best to be prepared for less-than-stellar rental lease experiences.

In the next chapter, we’ll go over what happens when someone breaks the rental lease and legal reasons for evicting a tenant.

If you want to start creating your online rental lease with our rules and state-specific clauses and disclosures already attached, sign up now.


Also published on Medium.

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