Common Pitfalls to Avoid when Writing a Residential Lease

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Even with all the ups and downs in today's market, real estate can still be a solid investment if you take the time to seek out the right deal. While owning your own home is a good start, owning rental properties is an even better next step.

But, before you go ahead and sign up your new tenant, make sure you have the right real estate lease in place. Your lease should be used to avoid any problems that might arise. Though leases can be nuanced and complex, due to state specific requirements, any lease can be improved upon by avoiding these four common pitfalls.

Agreeing to Fix or Maintain Too Much

Simply put, a lease is a contract. Whatever you agree to do in writing, you are responsible for doing. Frequently, tenants point out problems when they first sign a lease. So remember, if you make an oral promise to fix or change something, you can be held to that. If you can't confidently assume you can make the repair or improvement, then do NOT make the promise. Explaining to a tenant that he cannot have the new roof you promised because the tiles were more expensive than you ever imagined could land you on the hunt for a new tenant, or even worse, in a lawyer's office.

Illegal Clauses: Asking the Tenant to Do Too Much

In a residential lease, the landlord is responsible for keeping the premises habitable. The residential lease contractually binds the landlord to that standard. However, sometimes landlords include provisions in their leases that shift the burden of maintenance to the tenant. These provisions may range in character, but they are illegal nearly across the board. Asking a tenant to paint his own walls, replace his own carpets, or plumb his own pipes is against current laws and will not produce a favorable result for a landlord in a lawsuit.

Taking a First and Last Months' Rent at Lease Signing

In many states, asking for first and last months rent is no longer a legal practice. Instead, states have shifted to a system in which the landlord may request a first month's rent and a security deposit. The amount of the security deposit is at the landlord's discretion. Check the laws of your state before making a final determination as to what to charge your tenants. Also, keep in mind that most states require the landlord to pay annual interest on the security deposit after a specified period of time has elapsed.

Putting the Amount of a Rent Increase in Writing

In most states, rent increases have prescribed caps. Frequently, landlords want to outline rent increases in the lease to clarify the issue for tenants. However, even in states where rent increases are fixed by law, there are exceptions to those laws. Landlords may raise the rent under certain circumstances, such as when a property has not experienced a rent increase in a specified amount of time. Articulating the increase in the lease will form a contract around the issue, so you will lose the ability to change the increase percentage amount once the lease is signed.

The Bottom Line

Of course, tenants only want to rent in places where they feel that the landlord is fair and reasonable. With that in mind, trying to change terms at the last minute or refusing to contract for reasonable requests may make it harder to find the goods tenants every landlord desires. Just remember, with a little common sense and some care to avoid major pitfalls, you too can draft a fair and equitable residential lease.