You just bought your first rental property, and you’re ready to welcome your first tenant. Before you start the application process, does your lease include protective clauses? Insurance by Castle is here to share essential lease clauses that are must-haves on your lease.
Late Charges and Allocations
Inevitably, a tenant will pay rent late. Before that happens, add a late fee clause to your lease, so you have an easier time collecting the late fee and offsetting any financial inconvenience a late payment costs you. Consult with a legal professional experienced with helping landlords in California to understand how much you can legally charge for late rent and the grace period you must allow tenants. Besides the specific late fee amount, note the date the fee kicks in and if tenants can expect additional daily nonpayment fees.
To make ends meet, your tenants may rent out a portion of their rented unit. Rather than find out the hard way a tenant subleased a room, get ahead of disaster by including a subleasing clause in your lease. Without it, tenants may assume you don’t mind if they invite new people to move into a spare room, new people you did not vet.
Maybe you don’t mind giving tenants the option to sublet their space. If not, note your decision in the lease, but consider adding a one-time fee. Also require that the person subletting the space fill out an application, undergo standard applicant screening and sign a subletting agreement. That way, you cover all your legal bases.
You want to keep good tenants around for as long as possible. Rather than implement automatic lease renewal, go on an individual case basis. Include a clause that notes that tenants have 60 days to inform you of their intention to move out at the end of the lease term. Do your part to remind tenants of the lease renewal clause by sending them a new lease 75 days before the end of the lease term. That way, they have time to decide if they want to stay or move, and you have time to find a new tenant if your current one moves out. Another great thing about this clause is that if tenants don’t give you non-renewal notice, they become financially responsible for 60 days of rent if you cannot find a new tenant sooner.
Several and Joint Liability
For units with multiple tenants, consider including a several and joint liability clause to the lease. That way, every tenant bears individual and joint responsibility for damages to the unit and rent. The main purpose of this clause is that it allows you to classify all tenants in an individual unit as a single entity for serving legal documents, giving notice, suing for damages and collecting rent.
Use of Premises
Besides a subleasing clause, consider adding a use of premises clause to your lease. Tenants may want to move in family, friends and other unofficial tenants you haven’t screened or approved. You can prevent this from happening by adding a use of premises clause to your lease, specifying the number of tenants who can legally use and occupy a single unit. Note when guests become tenants, such as when guests stay on the property for more than two weeks in six months. After that time, the person must be added to the lease as a tenant, and you reserve the right to increase the rent.
You can take this clause one step further by prohibiting tenants from conducting a trade, business or another profession within the unit. Such activities can become a safety risk to other tenants, the building and you.
Surrender of Premises
When tenants move out, how do you expect them to leave their unit? Leave nothing to interpretation by including a surrender of premises clause to the lease. With this clause, you specify when the tenant legally surrenders the unit, which can be when the tenant turns over all keys and devices, such as garage door openers, or when the lease end date passes and the unit remains unoccupied. Along with the surrender or premises clause, include a move-out cleaning checklist that specifies how you prefer tenants to clean the unit and the condition in which you expect to find the vacant unit.
Account for as many possibilities as possible with the right clauses. Leave as little to misinterpretation as possible.
Request a quote today from Insurance by Castle to learn more about our landlord insurance options. Discuss your situation with one of our agents and explore insurance options to avoid costly repair bills and to protect your investment.