It's time for our next look into the mistakes and mess-ups of the property management world!
Today, we're looking at leases and lease signing, as well as the actual moving in part of the tenancy process. Let's jump right in:
Leases: Avoid ALL The Headaches!
Probably the single most important document you can pay attention to in terms of sidestepping headaches, the lease is also the easiest one to mess up. We shudder every time we take over a leased property and we get a two or three page leases -- there's no way such a short lease covers enough!
We started out years ago with a six-page lease and due to lessons "taught" to us by tenants, it's now almost 20 pages long.
There are a lot of parts to a lease that need your careful eye:
- Parties and Premises: Defines who the lease applies to and what property the lease is about.
- Term: Enumerates specific move-in & vacate dates, as well as how often the lease will need to be renewed.
- Rent: How much will it be? When is it due? How often can it be raised (and by how much)? What are the consequences for late or non-payment?
- Deposits: This could include security, pet and first/last month's rent.
- Fees: There are a lot of potential fees, including abandonment, late payment, screening, holding, NSF check, rules violation and more. Be careful because many states are implementing pretty strict rules about what can and cannot be charged to a tenant or prospect.
- Repairs: Spell out in detail what the tenant is responsible for, and be ready and able to deal with anything else that pops up. Don't forget to include pests and pest control here if you're not going to give that its own section!
- Utilities: Similar to "repairs," if you expect the tenant to pay a utility bill, you need to lay it out in detail in the rental agreement. No assumptions!
- Renter's Insurance: If you're going to require the renter to get renter's insurance, put that in the lease, along with minimum coverages and that you must be named as additionally insured.
- Right of Entry: Tell the tenant exactly how much advance notice you will give them before you walk into their home. Many states have laws about this as well, so know what your minimums are (usually 24 hours) before they sign the lease.
- Modifications: You can either make a specific list of modifications that the renter is allowed to make or a list of what they are NOT allowed to modify -- though the first list is generally much safer. Tenants are creative, especially when it comes to making changes to your property if they think they can get away with it.
- Pets: This is another section where it's best to be very narrow and put in a clause including penalties for unauthorized pets.
- Regulations: This includes any other rules of the property, from parking restrictions to lawn watering times to quiet times and beyond, and it needs to be detailed in the lease as well.
There are dozens of stories we could tell about every one of those bullet points and how they've ALL gone horribly wrong for us at one point or another -- but that would take pages and pages. Rather than lay out all of those mistakes for you, we'll just say that not going over your lease with a fine-toothed comb and magnifying glass is the single worst -- and most common -- mistake property managers make, period.
Do it, and do it carefully, and you'll save yourself a mountain of trouble in the long run.
1. Lease Signing Mistake: Proceeding When Tenant is Short on Move-In Funds
Of course, the above will not completely bulletproof your lease signing and move-in process.
You also have the wonderful ability to completely screw yourself over by letting a prospect move in owing a balance for the rent plus security deposit. Don't do it!
Every so often, we have someone who wants to move in, but doesn't have all the required funds. They always want to work out a deal to pay the balance on their next payday or pay it over the next 2-3 months. What type of tenant knows they have to move, knows how much money they need, yet can't come up with it when they need to move? Not one who's going to make a strong effort to pay the rent on time each month!
2. Move-In Mistake: Failing the Checklist Inspection
It doesn't matter how thoroughly you cleaned up, repaired, and renovated the property since the last tenant moved out -- nothing is ever perfect.
If you don't go through the property with a video camera, a still camera, a pen and paper, and a determination to document the condition of the property, you're opening yourself up for a big fight when it comes time to refund the security/cleaning deposit. You need to be able to prove, in court if necessary, that the water damage wasn't there in January, that the bathroom windows could open last Spring, and so on.
3. Move-In Mistake: Releasing The Keys Too Soon
This should be obvious, and yet it happens with surprising regularity: don't ever give the keys to someone until their background check has come back clean, they've paid all of their funds, and the lease agreement is signed.
Letting someone who isn't paid up, clean, and signed on into your property is just begging for any of several dozen problems, some legal and some "merely" very, very expensive.
There's a lot more on the way -- we're only halfway through the list of potential mistakes landlords can make! Keep looking right here for more.
This article originally appeared on The Bigger Pockets Blog.