How To Create a Custom Lease Agreement
to Protect Boston Rental Properties
Creating a lease agreement might seem like it should be a routine part of owning and operating rental properties in Boston. However, without enough attention to critical details, real estate investors are vulnerable to expensive problems due to a lease full of loopholes and gray areas.
Your rental agreement is one of the most important documents to protect properties and income. We're here to help! Our Boston property management experts have put together a guide to help landlords create airtight lease agreements. With a strong lease, the rules are clear, and property owners have legal documentation to enforce the rules. Here's what real estate investors need to know!
Table of Content
What Property Owners Need to Know About Lease Agreements
To get started, it's essential to understand that a lease is more than just a document that comes with a rental home. It's a legal contract that holds you and your tenants accountable to rules and responsibilities during the lease term.
You read that right! Signing a lease holds property owners accountable for delivering specific services required for operating safe rental homes for residents—much like it holds tenants accountable to the house rules.
So, what do owners need to know when preparing a lease? A rental property management company can help you with these concepts to get started, including:
- Avoiding a free lease agreement template. "Free" simple isn't good enough when it comes to the primary governing document for your investment properties.
- Customizing the lease as needed. A generic agreement or copying and pasting from one template to another won't serve you well. Each lease needs specific customization to ensure the best protection for your properties throughout each lease term.
- Knowing the laws. While customization is important, every lease must follow local, state, and federal laws. Ignoring specific terminology or creating a lease without legal direction can invalidate the document.
- Require signatures. A lease isn't valid or active until you and your tenants sign it. Never allow a tenant to move into a property without signing the lease first!
- Review the lease with tenants at signing. Signing it isn't good enough! Before anyone signs a lease agreement, walk through it with your tenants and make sure they understand everything in the document. Then, tenants and property owners sign the lease with a full understanding of rental due dates, rules, and consequences for violations.
If you're not sure about current laws that affect lease agreements or how to apply the right customization, a property management firm can help you through these first steps.
What Goes Into an Airtight Lease Agreements?
With an initial understanding of the importance of each agreement, residential property owners need to become familiar with everything that goes into a solid lease. From specific terminology to necessary details, your property needs the protection of a thorough agreement.
When something is missing from the lease, tenants have the opportunity to take advantage of the situation. While you might have missed a crucial detail, savvy renters can exploit an omission, typo, or oversight in ways that leave you with rental income loss, rental property damage, and tenants you can't legally evict.
We don't mean to make you paranoid that your lease isn't good enough! However, working with a Boston-area property manager and using the insights in this guide (and from our blog) can help you erase any doubt that a resident will find problems with your lease with costly consequences to follow.
Property management experts ensure that your rental agreement is comprehensive and includes the following necessary elements.
Pets and Emotional Support Animals
First, make sure you know the difference between pets and emotional support animals (ESAs). Then, work with a property manager to make sure your lease covers these topics legally.
While you might not offer pet-friendly properties, omitting mention of pets can lead to misunderstandings and a bad situation with tenants who bring in animals to the rental home. Your lease should include:
- Details about if you offer pets (or not)
- Pet criteria (for pet-friendly properties)
- How residents should request emotional support animals
- A clear indication that ESAs do not fall under lease rules for pets
Since a Massachusetts landlord cannot violate the Americans With Disabilities Act (ADA) or Fair Housing laws, emotional support animals and service handles must be handled differently than pets. A property management company can help you navigate the laws in this area and update your lease to comply.
Sometimes words and phrases make a big difference in the legality of your Massachusetts residential lease agreement. Before finalizing a lease, consult your lawyer and a property manager to review the agreement and ensure it includes critical terms, including:
- The names of every occupant
- The lease start and ending dates
- The rent payment due date and amount
- House rules and tenant responsibilities
- Penalties for late rent and other rule violations
- The property's description and address
- The security deposit amount
Omitting any of these critical terms, as well as a few others, can leave your lease without the necessary information that you need to enforce it if something goes wrong.
Reading a Residential Lease Agreement
With all of the information you need in a comprehensive lease agreement, how can anyone read and understand it? While a lease should be thorough, it doesn't have to be lengthy to provide the protection your property needs. However, even a short (yet complete) lease can require insights into reading and understanding it correctly.
Property managers in Boston are an excellent resource to guide owners and renters through a lease. We mentioned that it's important to review the lease agreement with new tenants (or existing tenants signing a lease renewal) before anyone signs it. That means it's important that everyone understands how to read it before move-in day!
Creating a lease isn't always enough to ensure that property owners and tenants also understand it. If you're copying and pasting details into a format that you found online or have used for a while, it's critical to take the time to review and really digest it.
Sit down with a property management expert to go over the completed document and review terms, details, dates, and more. When you're confident that you can review the lease with potential residents so that everyone understands it, schedule time to go over it with them. Tenants have a different perspective on the lease, so be sure to let them ask questions and highlight the areas that most apply to their life in the property.
The Lease Must Address the Term Length
We already talked about specific "terms" related to verbiage, but the lease also needs to address different timeframe "terms?"
In some cases, the required terms and some legalities might need to change based on offering a short-term vs. a long-term, or month-to-month lease. We mentioned that the start and end dates should be in the lease, and it's important the property owners and tenants understand the length of every Massachusetts lease agreement, whether it's a six-month term, full year, or month-to-month.
What's Best: A Long-Term vs. Short-Term Rental Agreement
Ultimately, property owners must decide which type of length is best for their properties and long-term goals. Many investors prefer only to offer long-term agreements, either 12-months or 18-months in length. Doing this:
- Helps confirm a tenant (and rental income) for at least a year
- Allows owners to retain excellent residents for longer
- Reduces the costs of marketing and make-readies due to frequent tenant turnover
When investors find excellent residents and renters are happy in your property, it can be a smart idea to offer a lease for two or three years. Locking in a quality tenant for several years ensures that you have consistent rental income and someone who cares for your home well. Sometimes good residents can be hard to find! With a renter who commits to staying for several years, owners have fewer things to worry about regarding on-time rental payments and keeping their properties in excellent condition.
While there are plenty of benefits to long-term leases, sometimes renters need a short-term solution. Offering a six-month lease can keep you from losing rental income from an empty property. Short-term leases also give you the opportunity to increase the rent amount as a concession for a renter who signs a lease for less than a full year.
What About Month-to-Month Leases?
Is it ever a good idea to offer a month-to-month lease? It can be, but investors need to make sure it's a monthly lease beneficial to their bottom line while protecting their properties.
When does it make sense to work with a monthly lease situation? If renters have given notice that they plan to move out, but they need an extra month or two before they can leave your rental, a month-to-month option can work well for them—and you. It can be appropriate to increase the monthly amount with this option, which might be a downside for tenants. Renters must also still give you 30-days notice before they leave the rental.
However, there are some "cons" to month-to-month situations. Property owners deal with frequent tenant turnover and higher costs due to marketing and make-readies when tenants move in and out every few months. Plus, with commitments of only a month or two at a time, investors put their properties at risk of low-quality tenants if they don't allow enough time to do a thorough tenant screening with each new monthly lease.
If you're not sure about the ideal lease terms for your investments, work with a Boston property management company to analyze your property, income, and potential risks when creating leases.
Create Custom Leases to Protect Properties and Income!
Creating custom leases is one of the fundamental elements that real estate investors need to master to protect properties and long-term income. We hope the details we've covered here help you with your next lease agreement. However, remember that none of the tips we’ve given here or in our free resources are a substitute for legal advice from an attorney, we hope our insights as expert property managers in Boston are helpful! For additional insights, download our free checklist, "How To Create a Custom Lease Agreement!"