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3 Critical Rental Lease Provisions to Revisit in 2012


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The simple truth is that the vast majority of rental property investors are forced to deal with tenants; although no one really wants to be a landlord, taking on this role is basically the cost of doing business when you have a long term investment strategy.  And one of the most critical documents associated with being a landlord is the rental lease.  The reason it is so important is that it legally dictates what each party’s rights are.  Therefore, it can either represent a nice safety net for you, or a nice legal loophole for your tenant to exploit.  As such, your rental lease requires special attention.  In particular, you’ll want to take a look at your pet policy, smoking policy, and security deposit verbiage.

Your pet policy is important because it impacts other areas of your business.  Most landlords do not allow pets because they can cause property damage, increase landlord insurance costs, and elevate your litigation risk.  If you have a “no pets” policy, remember that disabled people who are prescribed a companion pet of some sort are legally allowed to have the pet in your apartment whether you have a no-pets policy or not.  Also, remember that a no-pets policy should be non-discriminating; if you find that you’ve allowed a good tenant to have a pet despite your rental lease disallowing this, it’s probably a good time to revisit the associated lease language.


Smoking is another policy worth revisiting.  In many areas of the country, there is increasing pressure on landlords to eliminate second hand smoke from their rental properties.  As such, smokers increase your property costs as well as your liability risk.  Now, I’m not saying that you should immediately ban smoking and in fact I myself allow smokers in my properties, but it’s definitely worth some thought.

Regarding security deposits, the never-ending recession has caused an increase in the frequency of tenant-landlord disputes over security deposit deductions.  Thus, you ought to review the security deposit language in your rental lease to make sure the rules are spelled out precisely.  This includes language around the timing of when the tenant will receive his or her deposit back after move-out, differentiation between deposit types (i.e., pet deposit versus security deposit), and an overview of how any deductions will be calculated.

In the final analysis, your rental lease makes an incredible legal safety net if it’s done property.  Do NOT take this lightly, because an inadequate lease could derail your entire real estate business if you’re not careful.  Thus, take a hard look at the language and provisions within your rental lease today, and have a property attorney review it as a final check.  Yes this might cost a couple of hundred dollars, but when compared to the alternative of being exposed to litigation, it’s definitely money well spent!



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