A detailed rental lease agreement is imperative for both landlords and renters alike to minimize headaches down the road. The more thorough the lease to account for any issues that may arise, the better.
I’ve spent the past 10 years refining my residential lease agreement based on all past experiences. Feel free to run it by a lawyer or other property professionals before use, and make suggestions on how to make it even better. Tenant/Landlord law is a complicated area, and laws vary widely from state to state. What may work here may not work in your area, so please use prudence.
There’s always a feeling of excitement on both ends when a lease is first signed. Both parties go in with a leap of faith, hoping everything will work out. But conflict is inevitable in any sort of relationship. “Understandings” that are agreed upon with a handshake tend to mean nothing if they aren’t written out when problems arise.
As a Financial Samurai landlord, your goal is to achieve maximum tenant occupancy with minimum ongoing headaches in order to enjoy your freedom. Freedom is what having money is all about. If one of your assets is giving you more headache than freedom, then something must change.
Provide a good product with good service and clear terms, and I’m confident you will reap great benefits down the road.
RESIDENTIAL RENTAL LEASE AGREEMENT
LEASE AGREEMENT, entered into between _______________________ (Landlord/Owner) and
MASTER TENANT: ____________________________________________
TENANT 2: _____________________________________________
TENANT 3: _____________________________________________
TENANT 4: _____________________________________________
For good consideration it is agreed between the parties as follows:
1. Location: Landlord hereby leases and lets to Tenants the premises described as follows: address and description of property.
2. Term: This lease shall be for a term of one year, commencing on XX/XX/XXX and month to month thereafter, with the option to sign another one year lease after expiry. Tenants agree to move out if the Landlord decides to sell the property or use the property for personal use at any point after the one-year lease expires. A minimum advance notice of 30 days will be given to the Tenants if such situation arises.
3. Rent: Tenants shall pay the Landlord in monthly payments of $Rental Amount on the first of each month for the month ahead. Payment by direct deposit is preferred to avoid late payment and penalties. If payment is not received by the 4th day of the month, a $XXX/day penalty will be assessed until payment is made and received in full, which is why an automatic electronic payment is the best payment method. After 30 days of non-payment an eviction notice will be filed and delivered.
If tenants are in good standing, the landlord agrees the raise the rent to no more than $X,XXX for the second year.
Master tenant must provide a minimum 60 days heads up notification before departure after the one-year lease is over to provide enough time for landlord to find new tenants.
3a Security Deposit: Tenants shall pay a security deposit of $XX,XXX, which will be used to pay for damages incurred by the Tenants (damaged walls, ceilings, floors, fixtures, appliances, water damage, deck damage, etc.) that are not fixed on move-out. Whenever there is any sort of damage, the Master Tenant must notify the Landlord within 48 hours to make sure the damage does not get worse. Interest of 0.1% will be paid per annum on the deposit. Tenants agree to return the property in the same condition during first move in and will perform a walk through checklist of the house with landlord upon start and end of the lease.
4. Utilities and Services: Tenants shall pay for the following at their own expense: Electricity & Gas, cable, internet, Recology (garbage/recycling/compost), and water. Tenants must pay all charges promptly as they become due.
Landlord does not warrant the quality or adequacy of the utilities or services specified above, nor does Landlord warrant that any of the utilities or services specified above will be free from interruption caused by repairs, improvements, or alterations of the building or the premises or any of the equipment and facilities of the building, any labor controversy, or any other causes of any kind beyond Landlord’s reasonable control. Any such interruption–and any other inability on Landlord’s part to fulfill Landlord’s lease obligations resulting from any such cause–will not be considered an eviction or disturbance of Tenants’ use and possession of the premises, or render Landlord liable to Tenants for damages, or relieve Tenants from performing Tenants’ lease obligations.
5. Tenant further agrees that:
a) Condition of Premises: Upon the expiration of the Lease, the house shall return possession of the leased premises in the condition they first received. A required professionally cleaning must be done within one week of move out as a professional cleaning was done prior to move-in.
b) Assignment or Subletting: Tenants shall not assign or sublet any room at ADDRESS or allow any other person to occupy the leased premises without Landlord’s prior written consent. Tenants are prohibited to use programs like Airbnb or RelayRides to rent any part of the property including the parking space in the garage.
c) Alterations: Tenants shall not make any material or structural alterations to the leased premises without Landlord’s prior written consent. Any alternations made must match the existing quality an architectural style. Any remodeling must be done through a licensed contractor.
d) Compliance with Law: Tenants shall comply with all building, zoning, and health codes and other applicable laws for the use of said premises.
e) Tenant’s Conduct: Tenants shall not conduct on premises any activity deemed extra hazardous, or a nuisance, or requiring an increase in fire insurance premiums. Tenants shall respect the neighbors and keep noise level to a minimum after 10pm. Any notification complaints by neighbors or police via e-mail, writing, phone call will result in an initial warning. A second offense is a $1,000 fine. A third offense may result in a rent increase beyond $X,XXX or a 30-day notice to exit the property.
f) Pets: No pets are allowed. (Or: pets are allowed with a $XXX non refundable deposit)
g) Right of Termination and Re-Entry: In the event of any breach of the payment of rent or any other allowed charge, or other breach of this Lease, Landlord shall have full rights to terminate this Lease in accordance with state law and re-enter and re-claim possession of the leased premises, in addition to such other remedies available to Landlord arising from said breach.
7. Time of Essence: Time is of the essence in this agreement. By accepting the Tenants, the Landlord is declining all other interested parties who want to rent ADDRESS during the time period of XX/XX/XXXX to XX/XX/XXXX. If Tenants decide to cancel the lease agreement after the deposit is made, Landlord will keep $X,XXX of the $XX,XXX deposit to make up for lost time and income as the landlord will no longer entertain offers or show the house to other prospective tenants.
8. Indemnity: Tenants will indemnify and hold Landlord and Landlord’s property–including the leased premises–free and harmless from any liability for injury to or death of any person, including Tenants, or for damage to property arising from Tenants’ using and occupying the premises or from the act or omission of any person or persons, including Tenants, in or about the premises with Tenants’ express or implied consent.
9. Binding of Heirs and Assigns: Subject to the provisions of this lease against assignment of Tenants’ interest under this lease, all lease provisions extend to and bind, or inure to the benefit of, the parties to this lease and to every heir, executor, representative, successor, and assign of both parties.
10. Rights and Remedies Cumulative: The rights and remedies under this lease are cumulative, and either party’s using any one right or remedy will not preclude or waive that party’s right to use any other. These rights and remedies are in addition to any other rights the parties may have by law, statute, ordinance, or otherwise.
12. Choice of Law: This agreement is to be construed under California law. All obligations of the parties created under this lease are performable in San Francisco County, California.
13. Legal Construction: If any one or more of the lease provisions are for any reason held invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability will not affect any other provision of this lease, which will construed as if it had never included the invalid, illegal, or unenforceable provision.
14. Prior Agreements Superseded: This agreement constitutes the only agreement of the parties and supersedes any prior understandings or written or oral agreements between the parties respecting the subject matter.
15. Amendment: No amendment, modification, or alteration of this lease is binding unless in writing, dated subsequent to the date of this lease, and duly executed by the parties.
16. Remodeling. Tenants are allowed to remodel the house with prior consent by the landlord. The default is that all remodeling expenses are to be born by the Tenants as rent is paid for the condition in which the Tenants first moved in. Landlord is open to discussion but under no obligation to remodel or allow remodeling.
17. Premature break of the lease. If the Tenants break the lease before the one-year lease is over, the Tenants agree to pay for the remaining months left on the lease. All existing tenants are responsible for their portion of the rent if they are to break the lease before the one-year lease is over on XX/XX/XXXX. Replacement tenants can only be made after XX/XX/XXXX when the lease goes month-to-month.
18. Upon Moving out. The Tenants must agree to return the house in the same condition as when first moved in. The house must be professionally cleaned and vacuumed.
19. Occupancy. Only the aforementioned Tenants on the lease are allowed to live in the house for liability reasons. Guests are welcome for normal use, defined by a weekend stay up to a week a month. Tenants are liable for their guests. Tenants shall notify landlord over e-mail if Tenants desire a guest to stay longer. The current maximum number on the lease allowed is five Tenants signed on this lease. All tenants must get RENTERS INSURANCE for liability purposes. Landlord has landlord insurance.
20. Rental Increases. The house is not under rental control, but Landlord agrees to fix rent at $X,XXX a month from start lease date XX/XX/XXXX to XX/XX/XXXX (one year from lease start date) and raise rent by no more than $X,XXX on XX/XX/XXXX (one year from now) if the tenants are in good standing. A 30-day notice will be given. (See rental increase laws and abide by them. It’s often very helpful to give tenants guidance on any future rental increase plans as soon as possible).
21. House Rules. Tenants agree to follow these house rules: 1) Never buzz a person in without having visual contact first for security, 2) Watch the garage door close shut fully upon exit and entry for security reasons, 3) Keep the peace by respecting the neighbors for noise, especially after 10pm. Any house party needs to move indoors by 8:00pm due to density of the area (early the better, see section about complaints above), 4) Do not block the neighbor’s driveway, only your own. 5) Respect and care for the property.
22. Maintenance. Tenants are authorized to charge up to $200 to fix a problem without prior approval, but with explanation of repair and a valid receipt. Tenant will bear the cost up front, and landlord will reimburse within five days. Anything over $200 must get a written e-mail approval from the landlord. Bill can be mailed or e-mailed to landlord at Landlord’s address or Landlord’s e-mail.
* Water is the number one cause of damage to a home. Be careful not to overflow the tub or leave water on while away. Make sure drains are clear of debris before and during rain storms to prevent flooding.
* Make sure all appliances are off before leaving the house to prevent fires e.g. iron, hair blower, space heater, oven, stove. Fire damage is very seriously.
* ADT security is currently wired. Please be diligent about using the security system for your own protection.
* Replace furnace filter at least once every six months for your own clean air desires (manufacture recommends once every three months).
* Change smoke detector and C02 detector batteries as needed.
* Be careful with the use of the fireplace. It works, but someone must be present while the fire is going to prevent a fire in the house. Use grill to encase fire and protect the living room.
* Trash/recycling days are X-day morning at Y am pick up. Set trash outside after X pm or as late as possible as there are the occasional dumpster divers. All trash, recycling, and compost (green bin) must fit in the bins i.e. the lid must comfortably close, otherwise, there will be overflow of trash on the streets.
* Laundry is free to use for all tenants. Do not overload the washer or dryer, as that may cause engine failure or fire. After each dryer use, please clean the filter and throw away in the bin next to the dryer.
23. Rental Insurance. Tenants agree to get at least basic rental insurance as advised by the State of California to protect his/her belongings in case of theft, fire, and natural disaster. Landlord has Landlord Insurance from X-company.
24. Master Tenant. Master Tenant agrees to be the CFO of the house and be responsible for all on-time payments in full to the Landlord. The co-signer of the Master Tenant is responsible for all on-time payments in full if the Master Tenant fails to fulfill his duties and honor the agreement in this lease.
25. Landlord Inspection. Landlord may come by the property with a 24-hour heads up to inspect the property and pick up mail at his discretion.
26. Attorneys’ Fees. Should it become necessary for Landlord to employ an attorney to enforce any of the conditions or covenants hereof, including the collection of rentals or gaining possession of the Premises, Tenant agrees to pay all expenses so incurred, including a reasonable attorneys’ fee. ** Addition/suggestion from community.
Signed this __________ day of ___________________, 2015.
IN WITNESS OF THIS AGREEMENT, the Landlord and Tenants execute this agreement as of the day and year first above written.
LANDLORD: YOUR NAME
Landlord’s Mailing Address
TENANT 1 ____________________________________ (Master Tenant, Print Name)
TENANT 1 SIGNATURE ________________________ (Master Tenant, sign and date)
CO-SIGNER 1 __________________________________ (Print Name)
CO-SIGNER 1 SIGNATURE ______________________ (sign and date)
TENANT 2 ___________________________________ (Print Name)
TENANT 2 SIGNATURE _______________________ (sign and date)
CO-SIGNER 2 _________________________________ (Print Name)
CO-SIGNER 2 SIGNATURE _____________________ (sign and date)
TENANT 3 ___________________________________ (Print Name)
TENANT 3 SIGNATURE _______________________ (sign and date)
CO-SIGNER 3 _________________________________ (Print Name)
CO-SIGNER 3 SIGNATURE _____________________ (sign and date)
A THOROUGH LEASE IS IMPERATIVE
Feel free to use my residential lease agreement as a template to customize your own lease agreement. Each type of property has different issues. Each state has their own laws. Read up on them. The more you can spell out areas to watch out for in the lease to help your tenants, the better.
For example, one of my house’s light wells flooded when I was at work one day during a storm because the drain was clogged with debris. Water seeped through the cracks and poured through the downstairs ceiling. Now I write in the lease to check the drains for debris throughout the year. It also doesn’t hurt to e-mail a friendly reminder on maintenance issues as well.
A healthy rental deposit is vital for a landlord to protect his/her property from damages caused by the tenants and help ensure a smooth transition when it’s time to move out. I’ve always asked for 1.5 – 2 months of rental deposit plus the first month’s rent during move in.
Click here for a downloadable PDF version of my rental lease agreement.
Real Estate Recommendation
Explore real estate crowdsourcing opportunities: If you don’t have the downpayment to buy a property, don’t want to deal with the hassle of managing real estate, or don’t want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today.
Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible. For example, cap rates are around 3% in San Francisco and New York City, but over 10% in the Midwest if you’re looking for strictly investing income returns. Sign up and take a look at all the residential and commercial investment opportunities around the country Fundrise has to offer. It’s free to look.
Looking for a low interest rate mortgage? Check out LendingTree. They have the largest network of lenders online to choose from who compete to get your business. Mortgage rates are back down to all-time lows due to global uncertainty. Everybody should be refinancing now if they have a mortgage. If you are looking for a purchase mortgage, your timing is pretty darn good right now. Just make sure you live in your house for at least 5 years to ride out the volatility. When banks compete, you win!
Updated for 2019 and beyond.